Summary: The Sentier Research monthly median household income data series is now available for December. The nominal median household income was up $537 month-over-month and $2,072 year-over-year. That's a 1.0% MoM gain and a 4.0% YoY gain. Adjusted for inflation, the numbers were up $738 MoM and $1725 YoY. The real numbers equate to a 1.4% MoM increase and a 3.3% YoY increase, thanks to -0.37% drop in the Consumer Price Index.
In real dollar terms, the median annual income is 5.1% lower ($2,900) than its interim high in January 2008 but well off its low in August 2011.
Background on Sentier Research
The traditional source of household income data is the Census Bureau, which publishes annual household income data in mid-September for the previous year.
Sentier Research, an organization that focuses on income and demographics, offers a more up-to-date glimpse of household incomes by accessing the Census Bureau data and publishing monthly updates. Sentier Research has now released its most recent update, data through November (available here). The numbers in their report differ from the Census Bureau's in three key respects:
- It is a monthly rather than annual series, which gives a more granular view of trends.
- Their numbers are more current. The Census Bureau's 2012 data will remain its latest until September 18, 2014.
- Sentier Research uses the more familiar Consumer Price Index (CPI) for the inflation adjustment. The Census Bureau uses the little-known CPI-U-RS (RS stands for "research series") as the deflator for their annual data. For more on that topic, see this commentary.
Monthly Median Household Income Since 2000
The first chart below is an overlay of the nominal values and real monthly values chained in November 2014 dollars. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). I've added callouts to show specific nominal and real monthly values for January 2000 start date and the peak and post-peak troughs.
In the latest press release, Sentier Research spokesman Gordon Green summarizes the recent data:
The significant change in median income between November and December adds to the upward trend in median income since the low-point reached in August 2011. Our time series charts clearly illustrate that although the economic recovery officially began in June 2009, the recovery in household income did not begin to emerge until after August 2011. A significant factor contributing to the large increase in median income between November and December was the sharp decline in the Consumer Price Index (CPI), largely due to falling energy prices.
As for the data itself, Sentier makes it available in Excel format for a small fee (here). I have used the latest data to create a pair of charts illustrating the nominal and real income trends during the 21st century.
The blue line in the chart above paints the less optimistic "real" picture. Since we've chained in latest dollar value and the overall timeframe has been inflationary, the earlier monthly values are adjusted upward accordingly. In addition to the obvious difference in earlier real values, we can also see that real incomes peaked before the nominal (January of 2008, one month after the recession began, versus July 2008). Also the real post-recession decline bottomed later than the nominal (August 2011 versus September 2010).
The next chart is my preferred way to show the nominal and real household income -- the percent change over time. Essentially I have taken the monthly series for both the nominal and real household incomes and divided them by their respective values at the beginning of 2000. The advantage to this approach is that it clearly quantifies the changes in both series and avoids a common distraction of using dollar amounts ("How does my household stack up?").
The reality illustrated here is that the real median household income series spent most of the first nine years of the 21st century struggling slightly below its purchasing power at the turn of the century. Real incomes (the blue line) hit an interim peak at a fractional 0.7% in early 2008, far below the nominal illusionary peak (as in money illusion) of 27.2% six months later and now at 33.4%, a record high. In contrast, the real recovery from the trough has been depressingly slow.
A Closer Look at the Post-Recession Data
Let's take a closer look at the monthly data since the end of the Great Recession. The adjacent chart highlights the real monthly median values since 2008. The right axis shows the same scale as the chart above -- the percent change from the real household income value at the start of the 21st century. The December 2014 real median annual income is 4.4% below our turn-of-the-century starting point and 5.1% below its interim high in January 2008.
Is there seasonality to the monthly data? The column chart shows the monthly averages of nominal month-over-month change since 2000. The column chart suggests a caveat for the December 2015 household income jump. At least since the turn of the century, the December average is double the overall monthly average. More specifically, the December data has had some outliers to the upside: Six of the 15 Decembers over this timeframe have had nominal MoM increases of 0.8% or higher. Last month's 1.0% pop was matched in December 2011 and surpassed by the 1.6% surge in 2007.
As the excellent data from Sentier Research makes clear, the mainstream U.S. household was struggling before the Great Recession. At this point, real household incomes are in worse shape than they were four years ago when the recession ended.
I'll close this update with another look at real growth, highlighting the actual monthly data points and adding a three-month moving average. The MA trend has been slowly zigzagging higher since the trough in 2011, which illustrates Gordon Green's observations in the latest press release.
Check back next month for the latest update.
- Median Household Incomes: The Real Truth about the U.S. Economic Recovery, Five Years Later
- Median Household Incomes after the Great Recession: Household Types and Educational Attainment
- U.S. Household Incomes: A 46-Year Perspective
- U.S. Median Household Incomes by Age Bracket
- Median Household Income Growth: Deflating the American Dream
Also, be sure to download Sentier Research's latest report (PDF), which includes an overlay of real household income and the monthly unemployment rate. Highly recommended!
Note: For more information on the Census Bureau's Current Population Survey (CPS), visit the CPS Frequently Asked Questions page. A question I've often been asked over the years is what qualifies as income in CPS household survey. The CPS definitions page lists the following:
Earnings Unemployment compensation Workers' compensation Social security Supplemental security income Public assistance Veterans' payments Survivor benefits Disability benefits Pension or retirement income Interest Dividends Rents, royalties, and estates and trusts Educational assistance Alimony Child support Financial assistance from outside of the household Other income