How Inflation Is Affecting Household Income

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Posted: Jun 02, 2021 1:11 PM
How Inflation Is Affecting Household Income

Source: AP Photo/Andrew Harnik, File

Political Calculations' initial estimate of median household income in April 2021 is $67,788, an increase of $1,542 (or 2.3%) from the initial estimate of $66,248 for March 2021.

The latest update to the chart tracking Median Household Income in the 21st Century shows the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through April 2021. The inflation-adjusted figures are presented in terms of constant April 2021 U.S. dollars.


April 2021's jump in median household income is being accompanied with rapidly rising inflation, which is eroding the purchasing power of American households. That observation is brought home in the following chart, where we find that while the year-over-year growth rate of nominal median household income has turned positive, when adjusted for inflation, it is continuing the recessionary decline.


Analyst's Notes

The BEA's estimates for aggregate wage and salary data in October 2020 through March 2021 were revised significantly upward from the Bureau's previous estimates. The upward revisions ranged from a low of an increase of 1.1% for October 2020 to a high of 2.2% for February 2021, with March 2021's estimate increased by 2.1%. The revisions suggest a stronger economy in the U.S. than previously reported during this period.

References

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: 28 May 2021. Accessed: 28 May 2021.

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: 28 May 2021. Accessed: 28 May 2021.

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: 12 May 2021. Accessed: 12 May 2021.