Before Coronavirus, Median Household Income Was Rising

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Posted: Apr 01, 2020 12:56 PM
Before Coronavirus, Median Household Income Was Rising

Source: AP Photo/Seth Wenig

Political Calculations' estimate of median household income rose 0.3% February 2020, increasing from January 2020's initial estimate of $66,370 to $66,538.

The following chart shows the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through February 2020. The inflation-adjusted figures are presented in terms of constant January 2020 U.S. dollars.

To see the chart, click here.

Analyst's Notes

The U.S. Bureau of Economic Analysis released the personal income data used in our analysis on 27 March 2020, having compiled it earlier in the month, most likely before 13 March 2020, when President Trump declared a national emergency for the coronavirus epidemic and certainly before 19 March 2020, when California imposed the first state-wide stay-at-home orders for residents and the widespread closure of businesses, which marks the beginning of a national recession. Through the end of March 2020, three out of four Americans live in states or regions subject to similar orders.

Given that timing, the February 2020 estimate for median household income represents the last data point in the series that will not be affected by the coronavirus epidemic. We anticipate that future data will be subject to substantial revisions given the extent of the disruption to the U.S. economy, which will make our median household income estimates less accurate until the economic situation stabilizes.

Other Analyst's Notes

Sentier Research has suspended reporting its monthly Current Population Survey-based estimates of median household income, concluding their series with data for December 2019. We'll miss their monthly updates, while we continue to provide the estimates from our alternate methodology.

Statistically, over 240 months from January 2000 through December 2019, our estimates have fallen within 0.9% of Sentier Research's estimates in 70% of observations, within 1.8% in 95.8% of observations and within 2.7% in 99.6% of observations. The greatest deviations between our results and Sentier Research's estimates occurred in October 2000, where our estimate was 3.2% higher than Sentier Research's figure, and in February 2010, where our estimate was 3.1% lower than Sentier Research's figure.

In other words, we have a pretty good model for estimating median household income in the United States, which the coronavirus epidemic and the response to it is going to put to the test.

References

Sentier Research. Household Income Trends: January 2000 through December 2019. [Excel Spreadsheet with Nominal Median Household Incomes for January 2000 through January 2013 courtesy of Doug Short]. [PDF Document]. Accessed 6 February 2020. [Note: We've converted all data to be in terms of current (nominal) U.S. dollars.]

U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 13 February 2020. Accessed: 12 March 2020.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Population. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 27 March 2020. Accessed: 27 March 2020.

U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Compensation of Employees, Received: Wage and Salary Disbursements. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 27 March 2020. Accessed: 27 March 2020.