Posted by: Josh Lehner | October 11, 2016

More on Household Income Growth

Mea culpa. A couple weeks ago when discussing the latest median household income trends, I used the wrong inflation adjustment, thus skewing the 2007 to 2015 comparison. It made the data look worse than it was, even as the big picture patterns and comparisons remain the same. The 2014 to 2015 adjustment was correct. I have updated the previous post with corrected data. My apologies.

In the meantime, to better show the trends in household income at various parts of the income distribution, I have created the graph below. Don’t worry, the inflation-adjustments are correct here.

Anyway, the story remains the same. The highest-income households have seen the best trends in the past decade. The typical household’s income is now nearly back to pre-Great Recession levels, although still below after accounting for inflation. Lastly, since bottoming out in 2012, income gains at the bottom of the income spectrum have actually been the strongest.

These improvements are all about the strong labor market. Middle- and lower-income households only have wage income and the safety net, more or less. Thus when the economy gets tights — more people have jobs and wages rise — those in the middle and lower half see better income gains. A strong economy at or at least nearing full employment has different implications for the outlook as discussed before. Lastly, it should be noted that higher income households have a wider variety of income sources, including capital gains, rental income, dividends and the like which have generally performed better; thus their better trends in recent years (and decades).

hhincgrowth07thru15


Responses

  1. Josh- You do so much great work. Huge addition for your followers. A minor error comes with the territory. Am impressed you fessed up as almost all of us would have never known. Am sorry to miss your talk in 10 days or so at the multifamily group, as I am on Camino/pilgrimage in Spain and Portugal. Lot of hot button issues with rent control and housing affordability. Good luck with the talk. Next time. Best- Mark

    Sent from my iPhone

    >

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