May 2018 Median Household Income Upward Trend Continues

from Sentier Research

New data from the monthly Current Population Survey (CPS) indicate that median annual household income was $61,858 for May 2018. Median household income in May of this year was higher than for any other month since January 2000 (series start), yet only 2.4 percent above the January 2000 estimate of $60,383 after adjusting for price changes.

Median household income for May 2018 was 1.8 percent higher than May 2017, when the median stood at $60,777.

Median household income in May 2018 was 3.7 percent higher than the median of $59,673 for December 2007, the official start of the "great recession" and 13.3 percent above the post-recession low point of $54,573 that was not reached until June 2011, two years after the recession had officially ended.

Median annual household income has displayed a somewhat erratic pattern over the past several years. More broadly, there has been a general upward trend in median household income since the post-recession low point reached in June 2011. This upward trend was initially marked by monthly movements, both up and down. Many monthly changes were not statistically significant. By the summer of 2014 however, that uneven trend became dominated by a series of significant monthly increases. (See Figure 1)

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The general upward trend in median annual household income since June 2011 reflects, in part, the low level of inflation as measured by the CPI for all items used in this series, as opposed to the CPI less food and energy. Energy prices have recently been fluctuating, 2 which has had an effect on the CPI for all items. The CPI for all items increased by 0.2 percent between April 2018 and May 2018, and also by 0.2 percent between March 2018 and April 2018.

According to Gordon Green of Sentier Research,

Real median household income has continued to display an upward trend over the past 12 months (up 1.8 percent), and especially since the low point reached in June 2011 (up 13.3 percent). We continue to monitor the course of inflation, as this has a significant effect on the trend in real median annual household income. The CPI for all items continues to bounce around, and the future movement of oil and gas prices is likely to have a significant effect on the overall rate of inflation as well as real median household income. We are at a point now where real median household income is 2.4 percent higher than January 2000, the beginning of this statistical series. Not an impressive performance by any means over a period spanning almost two decades, but the trend line has been positive for nearly seven years.

Additional Highlights

The May reading on the labor market from the U.S. Bureau of Labor Statistics shows an improvement compared to April:

• The official unemployment rate in May 2018 was 3.8 percent compared to 3.9 percent in April.
• The median duration of unemployment was 9.2 weeks in May 2018, significantly lower than April 2018 (9.8 weeks).
• The broader measure of employment hardship, which includes the unemployed, marginally attached workers (of which discouraged workers are a subset), and persons working part-time for economic reasons, was 7.6 percent in May 2018, slightly lower than the April 2018 reading (7.8 percent).

The Sentier Household Income Index (HII) shows the value of real median annual household income in any given month as a percent of the base value at the beginning of the last decade (January 2000 = 100.0 percent):

• The Sentier HII stood at 102.4 in May 2018, higher than December 2007 (98.8) when the "great recession" began, and higher than June 2009 (97.0), when the "economic recovery" subsequently began.
• The Sentier HII was 90.4 in June 2011, the low point in our household income series.