By James Kwak
There’s been a fair amount of triumphalism about the Census Bureau’s recent report on income and poverty, which showed a 5.2% increase in median real household income from 2014 to 2015. For example:
I usually try to be restrained, but this is unambiguously the best Income, Poverty & Health Insurance report ever. https://t.co/YdN4HgtIvR
— Jason Furman (@CEAChair) September 13, 2016
But, and I don’t think Jason Furman would disagree, this is not particularly strong evidence that everything is rosy, or that “America is already great,” as some would have it. As many people have pointed out, median household income in 2015 was only back to its 1998 level. Actually, when you take into account a methodological change in 2013, it’s still 5% below its 1999 peak.
Also, if you’re going to celebrate the good years, you should acknowledge the bad years. Here is the annual change in median income for every year since 1985, ranked from best to worst:
The years in red are the years of the current recovery. As you can see, this is the first time annual growth has exceeded 0.3%, despite the fact that the economy has been growing every year.
Now, it’s possible that 2015 will be the first of several good years. Maybe unemployment has finally reached the point where companies have to offer higher wages to workers, instead of telling them to apply for government benefits. On the other hand, going simply by how long recoveries usually last, we are due for a recession—which would mean another economic cycle in which ordinary households became worse off.
There’s no way to know for sure, of course, because this is macroeconomics. But on its own, one data point does not make a trend. And so far, this century has not turned out so well for the median American family.