And this is the post where I get to demonstrate what a naturally pessimistic person I am.
Yesterday there was genuinely good economic news for typical Americans. The real median household income in the U.S. – the income at which half of American households earn less and half earn more, adjusted for inflation – increased for the first time since the Great Recession. It rose 5.2%from 2014 to 2015 to $56,516. And not only did it rise, but it was the single biggest yearly gain since the Census Bureau started keeping this score. Also, the gains were widespread. Americans at every level of income, every demographic group, and in every region of the country made more money. In fact, more of the gains went to the lower end of the economic spectrum, defying long-term trends. Again, this is all fantastic news.
But, put in context, it’s clear how much further we have to go.
First off, this is one year’s worth of data. We need sustained growth in income to dig out the enormous hole most Americans have been in since the Great Recession. The 2015 median income is still 1.6% below what it was in 2007. Looking longer-term, it’s 2.4% below the peak set in 1999. When it comes to the most vulnerable, the bottom 10% of income earners, as Eduardo Porter points out in the New York Times, they are still slightly poorer than they were in 1989. Porter makes this further point about the data, too:
What’s more, changes starting in 2013 in the way the census asks people about their incomes can distort comparisons with previous years. After adjusting the data for these changes, according to Elise Gould of the Economic Policy Institute, the income of American households in the middle of the distribution last year was still 4.6 percent below its level in 2007 and 5.4 percent below where it was in 1999.
Again, much more sustained growth is needed. But I worry that is at risk. We’re seven years into an economic recovery. Hopefully, that does not mean there is a recession around the corner, but the risk is not zero. Also, many Federal Reserve officials just can’t stop talking about raising interest rates, which under the usual pattern, would lead to slower growth. I understand the concerns. Because of insufficient action by the federal and many state governments, the Fed ended up being tasked with fighting off the Great Recession mostly by itself, and it used a variety of extraordinary means to do so. The upshot is the Fed might not have many tools left to fight the next recession when it comes.
Turning to politics – it is an election season, after all – it’s not hard to understand why these number are being celebrated. Donald Trump has built his campaign, in part, on declaring the U.S. economy is swirling cesspool of misery. It turns out – like so much of what he says – to not be true. In the end, I’m uncertain how much direct impact the presidency has on growing the economy. Mostly I think they can avoid hindering it too much. But if you’re inclined to use economic metrics as a way of judging what party should be in power, well, then you should vote for Democrats. But do I really think any of this will really persuade Trump supporters to turn away from him? Sadly, no.