U.S. Census: Progress made in income growth
Mid- and low-income households benefiting
For many low- to moderate-income people who seek help at a South Side-based credit counseling service, living standards have fallen to the point where a budgeting session often comes down to making tough choices, such as whether to pay the water bill or buy food.
“We always tell them to pay the water bill because there is no assistance for water bills, but we can assist them in getting help with food,” said Heather Murray, manager of education at Advantage Credit Counseling.
The U.S. Census Bureau reported this week that incomes for both middle- and low-income households rose last year more than they have in decades. While Ms. Murray has not seen much of that in her work with people on the financial brink, economists are cheering the report, which states that middle-class and low-income Americans had the fastest annual income growth on record between 2014 and 2015.
Median household income rose 5.2 percent from $53,718 in 2014 to $56,516 in 2015 — the first annual increase in median household income since 2007, the year before the credit crisis that rocked the American economy and devastated so many families.
What economists have praised most about the census data is that the income gains have not only benefited the top 1 percent, but the number of people in poverty fell by
3.5 million. That sent the poverty rate down from 14.8 percent to 13.5 percent, the largest one-year drop since 1968, with even larger improvements for AfricanAmericans, Hispanic Americans and children.
“The numbers surprised a lot of people that they came out so high,” said Jay Sukits, a professor of business at the University of Pittsburgh. “It’s slow progress, but we are moving in the right direction. The long-term effect on the U.S. economy will be great if this is a trend and we continue to see that type of rise in income.”
Mr. Sukits said rising incomes across the board will lead to increased consumption, which increases retail sales, and that should have a positive impact on the nation’s gross domestic product.
But he recognizes that many American families are not yet feeling the uptick in reported income.
“There are so many people still out of work,” he said. “The labor participation rate is still very low. For people who are working, this news is good news. But for people not working or underemployed, this doesn’t affect them. They could still be hurting.”
The labor participation rate describes people who are either employed or actively looking for work. The rate has declined in recent years as some people have given up looking. Mr. Sukits said the current rate is 62 percent. Prior to the Great Recession, the rate hovered around 66 percent.
The census data showed that real median income of non-Hispanic white households increased 4.4 percent; black households 4.1 percent; and Hispanic-origin households increased 6.1 percent between 2014 and 2015. That represents the first annual increase in median household income for non-Hispanic white and black households since 2007, according to the Census Bureau.
The number of men and women working full time, year-round with earnings increased by 1.4 million and 1 million, respectively between 2014 and 2015.
“We saw gains for all income groups,” said Gus Faucher, deputy chief economist for PNC Bank, Downtown.
“It indicates we are finally starting to see the benefits of the economic expansion started in 2009 spread broadly across U.S. households. Previously, most of the benefit went to high-income households. Now it’s spread to more household incomes and more demographic groups.
“Consumer spending takes up two-thirds of the economy,” he said. “Households will boost spending, which means stronger economic growth in 2017 than we have this year. These numbers are adjusted for inflation. One reason these numbers look so good is because inflation is low due to falling energy prices, which boost incomes adjusted for inflation.”