The big economic news last week wasn’t our office’s forecast, but the big jump in median household incomes nationwide. Two separate reports showed two different numbers: the Current Population Survey gains were 5.2% and the American Community Survey gains were 3.8%. The big takeaway isn’t the differences but the strong growth seen in both. The recovery is finally translating into income gains for the majority of households. In fact, per the CPS data, the largest percentage increases in incomes were seen at the lower end of the income spectrum. This coincided with a relatively large decline in the poverty rate as well, as would be expected. Overall certainly good news and a welcome reprieve from lackluster to declining incomes in recent years. What is driving the results? I’ll let Jed Kolko, writing at Calculated Risk, explain:
Most of the jump in median household income, therefore, appears to be rising earnings, with rising employment playing an important supporting role. The labor market improved for workers on both of these fronts: the rise in median household income is indeed good news.
ACS data was also released for state and local jurisdictions* and the Oregon data looks even better. From 2014 to 2015, Oregon’s median household income grew by 6%, the third fastest rate in the nation behind Montana and Tennessee. The poverty rate dropped by more than a percentage point as well. However, from 2007 to 2015 Oregon’s median household income gains rank just 32nd best among the states and DC. And even with the poverty improvements, the state is only about halfway back down to pre-Great Recession poverty rates. Still, progress is being made and the gains are seen throughout most of the state as well.
Below is an update to our office’s graph comparing median household incomes for Oregon and the U.S. The 2015 gains mean Oregon’s median household income is 2.9% below the U.S. median, which is more in-line with the typical year where our incomes trail the nation by 2-3%. In inflation-adjusted terms, Oregon’s income in 2015 is about 1.5% below 2007 levels and 2% below 1999 levels, at least when using the PCE deflator. Using different deflators or measures of inflation will change those percentages, sometimes drastically so.
In recent years our office has been hitting on the major theme that robust job growth in Oregon has translated into solid wage gains as well. This is not the case nationally. It terms of the data, it was more a matter of time before the stronger Oregon labor market translated into median household income growth and lower poverty rates. 2015 is a start. Given the ongoing economic strength, 2016 is shaping up to be even better. A key question for the outlook is whether or not the economy can get fully healthy before the next recession. This did not happen in the housing boom. The cumulative progress made since 2009 or 2010 has actually been very significant even if year to year changes are muted. Full employment is now within sight, although not here yet. Broader gains across the board are now being seen, however incomplete they may be thus far.
* All of the 2015 ACS published tables are now available. Our office is working on dissecting the latest data and updating our records. The good news we have new data (yay!) the bad news is we have new data (have to update everything…). The microdata won’t be available for another few months. Then the real work begins when we can crunch the underlying sample data.
Mark McMullen
Josh Lehner
Oregon Office of Economic Analysis 
[…] in yesterday’s look at how median household incomes are finally rising was that, at least nationally, the lowest incomes increased by the largest amount. That was based […]
By: Household Income Growth by Quintiles | Oregon Office of Economic Analysis on September 20, 2016
at 10:03 AM
[…] of rising earnings and rising employment have contributed to increases in median household income. Read more here to find out more, and visit the Office of Economic Analysis […]
By: Oregon Office of Economic Analysis Reblog: Oregon median household income rises (finally) – Oregon Auditing on September 21, 2016
at 9:09 AM
The problem with these data is that you are looking at household income, not per capita income. That can give a very misleading impression because when times are tough, people are likely to combine households more than in good times. Single people who otherwise might have individual apartments or maybe one roommate are likely to seek more roommates to spread the cost. Those single people may even move back with parents. That reduces the number of households and thus can raise the income per household even as income per capita is dropping.
As a simple example, consider an empty nest couple with an income of $100,000 per year which is their household income. With just the two of them, that means a per capita income of $50,000. Their son loses his job or finishes college or for some other reason moves back in with them. The job market stinks so he takes a $20,000 per year job. The income of that household just went up to $120,000 per year, a 20% increase. However, there are now three people in that household so per capita income there is now only $40,000, a 20% decrease.
Please provide the real data, the per capita income.
By: Hal Lillywhite on October 5, 2016
at 10:27 AM
Hi Hal, thanks for the comment. We regularly write about various income measures and sources. The latest one is here.
https://oregoneconomicanalysis.com/2016/08/18/oregon-income-update-2016/
Also previously we talked about some of the differences in the various measures.
https://oregoneconomicanalysis.com/2016/06/23/oregon-income-a-discussion/
The upshot is as follows. All of these are real data, they’re not made up. More importantly, there is a time and place to use different measures. One issue with per capita income is it does not take into account the distribution of income. If Bill Gates walks into a bar the per capita income goes through the roof even as the typical patron sees no change. Median household income does a better job of looking at the typical household and their income situation. But as you point out it is not without flaws. Unfortunately there is no one measure to rule them all.
By: Josh Lehner on October 5, 2016
at 11:37 AM
Huh? If Bill Gates walks into a bar, it will have the same effect on household income of people in that bar as it does on their per capita income.
Your response seems to be addressing the difference between mean and median income which is not at all what I was discussing. The fact remains that household income is a poor measure of economic improvement for the reason I described in my original post.
By: Hal Lillywhite on October 5, 2016
at 12:32 PM
PS, just happened across data showing that since about 1960 the percentage of 18-34 year olds living with parents has been increasing, an increase that accelerated in about 2005. That is now up to over 30% of those young adults living with their parents and having their income (if any) counted in the household income of the parents home. That will obviously skew the statistics.
http://www.usnews.com/news/best-countries/articles/2016-10-05/countries-where-the-most-young-adults-live-with-their-parents
By: Hal Lillywhite on October 5, 2016
at 12:41 PM
Given the income distribution in our country, the difference between median and mean is a really big deal. While median household income is not without flaws, it is our office’s position that it is a better measure to use when comparing incomes across geographic locations. As discussed in the links before, much of the per capita difference for Oregon comes at the highest end of the income spectrum. Households and workers in the middle and bottom end of the income distribution have incomes relatively similarly to their national counterparts. As for household size, yes kids in the basement is pushing that figure up, but we are seeing lower marriage rates, more single person households and the like that are pushing that number down. On net from 2005 to 2015 the average household size in Oregon has moved from 2.5 to 2.54 per the latest Census data. Nationally it has gone from 2.6 to 2.65.
By: Josh Lehner on October 5, 2016
at 2:47 PM
Are you trying to distract from the issue? I did not bring up mean vs median and it has nothing to do with my point. I am quite aware of the difference and when each is more useful, but that is a distraction. The point is *household* income vs per capita income.
Nor does the average household size alone tell the whole story. The real information we need is the average number of income earners in those households. I do not know that information but, from the reference I linked earlier, the percent of young adults in the US living with their parents has increased from about 24% to about 32%. a 33% increase. Undoubtedly many of those young adults have income that adds to the household income of their parents. In addition, it is likely that many young adults have gone from zero or one roommate to 3 to 5 roommates, and at the same time we have seen an influx of people from south of the border who tend to have larger families and even live with two or three families under one roof. How significant is that? I do not know but it is important to the question of if income levels have really increased significantly.
Now, if you are going to answer me, please stick to the subject and stop trying to distract with mean vs median.
By: Hal Lillywhite on October 5, 2016
at 4:39 PM
Sorry for the confusion. The links provided above should have the information you are looking for. I would also suggest using the search box on the right hand side. Over the years there have been quite a few posts related to the topic.
By: Josh Lehner on October 5, 2016
at 8:43 PM
Sorry, while your links mention per capita income, they do not give actual numbers. Why not give those data rather than the misleading household income? In fact it would be best to provide per capita for adults no longer in school. Probably difficult to distinguish statistically between college students and 20 year olds not in school so maybe per capita for those over about 25.
By: Hal Lillywhite on October 6, 2016
at 11:53 AM
[…] you combine all of the above you get stagnant household incomes for those in the middle and bottom part of the income distribution. The reason is such households […]
By: Economic Anxiety in Oregon, A Summary | Oregon Office of Economic Analysis on November 9, 2016
at 1:14 PM