US Households Continue to Bleed

From Unconventional Economist, who has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs. Originally published at MacroBusiness

Two former Census Bureau officials working at Sentier Research have released a new report claiming that median US household income is recovering, but remains 6.5% below its pre-recession level in real (inflation adjusted) terms:

After adjusting for changes in consumer prices, median annual household income declined during the officially-defined recession from $55,480 in December 2007 to $54,478 in June 2009. During the “economic recovery”, as the unemployment rate and the duration of unemployment remained high, median annual household income continued its decline, reaching a low point of $50,722 in August 2011. As of June 2013 median household income had recovered somewhat to $52,098 (seasonally adjusted estimates).

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What is arguably more disturbing is the fact that real median household income is now 7.2% below its January 2000 level:

Compared to January 2000, the beginning point for our monthly statistical series, median annual household income is now lower by 7.2 percent. (All income amounts in this report are before-tax money income and are presented in terms of June 2013 dollars).

Moreover, virtually all groups have been adversely affected by the slump:

Based on our data, almost every group is worse off now than it was four years ago, with the exception of households with householders 65 to 74 years old. For some groups of householders—Blacks, men living alone, young and upper-middle age brackets, part-time workers, the unemployed, females with children present, and those with only a high school degree or some college but no degree—the declines have tended to be larger than average. Changes in educational attainment during the economic recovery have played a key role in the findings, as we describe in the report.”

So much for the much celebrated US economic recovery.

* * *

Lambert here: Mission accomplished!

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

25 comments

  1. Moneta

    Following a couple of decades of fake productivity based on money printing, it is not surprising to see income drops.

    In the 70s, America had 2 choices:

    1. reduce its energy consumption and become less materialistic
    2. bask in its glory, keep on consuming because it is the greatest country in the world.

    It chose number 2. This meant a focus on the military to maintain sources of oil and exporting jobs to keep costs low.

    Today, it’s payback time for the choice made in the 70s.

    1. F. Beard

      Following a couple of decades of fake productivity based on money printing,… Moneta

      What? Are you a gold-bug?

      And the productivity increases have been real. The problem is the profits thereof have not been justly shared as they would be if we had an ethical money system – not a government-backed credit cartel.

      And enough with the running out of energy BS! That problem is being solved with advances in solar technology, batteries, and bio-fuel production from agricultural waste and if need be there is nuclear too.

      But what desperately needs reforming is the money system.

      1. JGordon

        Some of what you say makes sense, while the rest of it is suffused with wishful thinking and a lack of commmon sense.

        I suppose the biggest commonsense question you ought to be asking yourself is, “If all these alternative energy sources are so good, why haven’t any of them replaced fossil fuels yet?”

        The answer of course is that all of the sources you mentioned, from a mathematical, engineering, and scientific standpoint are not only incapable of supplying the same amount of energy to our industrial economy as fossil fuels, but in fact would also not even exist period if didn’t have a gigantic fossil-fuel based economy subsidizing their use. When your “alternative energies” fundamentally require the existence of fossil fuels to continue being manufactured and deployed you do not have much of an “alternative” energy structure.

        In other words, on that particular point you are engaged in delusional thinking, hoping against hope that some miracle of technology will come along and suddenly make alternative energy viable–since none exists today.

        1. F. Beard

          Solar technology is rapidly catching up to what Nature can do and don’t forget I included nuclear.

          Of course the Japanese and GE have poisoned the nuclear option in the minds of many but thorium reactors could, in principle, be used to synthesize liquid fuel and from the air if necessary.

          If not us, then a less fearful (because less guilty?) generation will.

        2. Nathanael

          Just wrong, JGordon. Solar is sufficient for supplying *more* energy than fossil fuels can. And yes, it can be used for *everything*.

          Battery tech is a little bit weak but it’s progressing. The conversion of *everything* from fuel-burning to electrical is pretty easy and is proceeding apace.

        3. Moneta

          I plant these energy is running out ideas on purpose.

          My goal is to show how there are 2 incredibly HUGE factions in America: those who think there is enough for everyone and those who don’t.

          Both groups might want to fix the system but as long as they don’t reach some agreement on the resource front, finding solutions is going to be tough.

          I personally believe that our world contains a lot of energy, but I don’t believe we have the technology and the economic structures to market our technological advances in time to offer the entitlements promised to the 50+.

        4. myshkin

          That these alternative energy sources would not ‘even exist period if didn’t have a gigantic fossil-fuel based economy subsidizing their use,’ begs the question regarding the subsidies to fossil fuels, outright and the far larger subsidies derived from the externalities that are not priced into the destruction of the environment and health.

      2. Bapoy

        Sure,

        Reform will be easy. Just think about how the economy will look when demand reverts to normal, without debt/credit, demand will no longer be pulled forward.

        I’m sure you think that will be fun. But come it will, either with a worst system like you are suggesting or gold.

        1. F. Beard

          Oh, so you think gold and deflation is better that reform and just restitution?

          Think God agrees? I don’t. But then I read the Bible. You?

  2. Banger

    The interesting thing about this general and gradual decline is that most people are ok about it. There is no sense of outrage only resignation. If you’re doing well then it’s too bad for those that aren’t you’ll just keep on keeping on and figure you’re just more virtuous then the next person. If you’re not doing well then that’s just the way it is–no need to join a union or organize. That era is long gone.

    We have a passive, confused and somewhat sullen population that lives for the toys the capitalist bosses have created. Few people are bothered if they can’t afford a vacation–they’ll just watch cable or get on Facebook on the mobile device.

    1. myshkin

      @banger

      Recalling of course the much used metaphor of a frog in a pot of warming water. That and it all ends with a whimper not a bang and wondering who stole the damn lilly pads.

    2. Lambert Strether Post author

      If indeed “we have a passive, confused and somewhat sullen population” that is the fault of “the left.” You’re describing TINA; it’s up to “the left” to provide the alternatives! Because if they don’t, somebody else surely will.

      Again, I point to the bottom line of the post which — and I know this may come as a surprise to some — you will find at the end of the piece:

      My point, however, and I do have one, is that I don’t think “Jenny,” unless she had a radical change of heart, would have done what my friend’s student customer did: Remember the clip a year later and share it. One wonders how many of the 6,000,000+ viewers did the same. Because if this clip has, as I think it has, gone viral, that would look to me very much like the slow crumbling of support for an isolated regime. And to me, the two takeaways are:

      1. “America is no longer the greatest country in the world,” and

      2. “We didn’t scare so easy.”

      No wonder Occupy, eh? So, oddly, hope.

      Another way of putting this is that the student who shared the video, a year after its introduction, was not passive, confused, or sullen. Or, gawd forbid, part of “the sheeple,” a hideously dismissive, insulting, soul-deadening, and hope-destroying word that I thank The God(ess)(e)(s) Of Your Choice, If Any, has not yet appeared on this thread.

      1. Banger

        There are people who are not simply watching it all go by but are attempting to forge a new way of looking at things and the great thing is that there are so many “paths” out there, so many alternatives and this is wonderful. But I suggest to you that the numbers of people who are interested in alternatives, and never mind share a leftist POV, have not really changed very much over the years.

        I, a child of the 60s radical and psychedelic moment as well as all the different shapes alternative points of view, I’ve seen mystical revivals, which then fall, I’ve seen the environmental movement rise and fall (and it has fallen almost off the map), I’ve seen Hollywood’s flirtation with alternative mythological frameworks from Star Wars to The Matrix but has it changed anything? Well, what has changed is that there is some small bit of sanity coming about about cannabis and some pretty strong movement in gay rights, in part because so many of the children of the oligarchs are, in fact, gay. But in terms of compassion, interest in consciousness and wisdom, interest in basic moral principles connected with the American tradition like liberty, rule-of-law, the Constitution and so on we are rapidly driving in precisely the opposite direction–this society, for all the problems of the late sixties, is way more repressive, way more of a police state (and it wasn’t great back then). There’s nowhere to run and nowhere to hide–the authorities know everything about you, even bankruptcy can’t relieve many debts it once did.

        I remember thinking that by spreading ideas about meditation and yoga (I’m thinking here of the metaphysics) would bring the ruling elites to a higher level of consciousness (my ex-wife and I opened up a yoga studio in the DC area to do just that) would begin to spread compassion to the stiff and rigid people who ran the corporate and government bureaucracies but the opposite happened. Oprah, New Age, Buddhism, Yoga, and all the movements within the Christian churches to open up the the mystical and the movement for justice all these dedicated people and really, nothing has been changed in this country–though much has changed in Latin America but that seems to be the only region in the world that has changed–Europe has gone dramatically backwards and is on the cusp of turning from its social-democratic past.

        I’m deeply saddened by all this as was my father at the end of his life who saw what the ascendancy of the right had done to the country he loved and served all his life. We saw different faults but he knew we were headed in the opposite direction from where he thought we would go.

        As for today’s left–where is it? I don’t see it unless you call the jokers on Comedy Central as leftists or the hacks on MSNBC and, even worse, today’s White House, leftists which they most certainly are not. At best, what is left of the real left keeps the information flowing–but even then within constraints we did not have in the old days when there was no “political correctness” and people like Hunter Thompson could write freely–imagine a Hunter Thompson today! What a joke–he wouldn’t have gotten past the Alex Jones show–btw, Alex, who is a real genuine crazy man has some very cool people on his show and he’s on the right–he just says what he wants without too much hemming and hawing–there is no left-wing equivalent of spirited and fearless and highly literate social criticism since Bill Hicks, Hunter, and George Carlin died. Where is that fearless spirit today?

        1. Nathanael

          “As for today’s left–where is it? ”

          Suppressed. But hey, read Black Agenda Report. The left exists. It’s just not organized.

          And yes, the jokers on The Colbert Report are left-wingers. The power of humor to influence must not be underestimated, and they’re *good at it*. They’re pushing the window of acceptable discourse.

        2. Moneta

          I don’t see how materialism and consumerism pushed to the extreme can lead to liberalism.

          Add to that an ageing population that typically becomes increasingly materialistic and a general movement to the right over time was to be expected.

  3. New Deal democrat

    While the data is correct, the conclusion drawn by most of your readers probably is not. The Sentier paper does not show a decline in wages, salaries, earnings, compensation, or paychecks (something i have confirmed with them directly). Those have stagnated for a decade, but actually rose during the recession, declined about 3% after, and have steadied or slightly risen in the last year, mainly due to the effects of $3+ gasoline flowing through the economy. I’ve written about it, but if you don’t want to believe me, how about this paper by the Economic Policy Institutue published just this past week: http://www.epi.org/publication/a-decade-of-flat-wages-the-key-barrier-to-shared-prosperity-and-a-rising-middle-class/

    The Sentier data is taken from the Household Survey, which includes both retirees of all ages and the unemployed. The typical retiree takes a 50% haircut in income, and Boomers are retiring at the rate of 10,000 a day. According to the Sentier paper, the typical unemployed household has suffered a 17% loss of income, from nearly the median in 2009 to well beneath it now. In other words, about half of the households with unemployed fell from above the 2009 median income to below it. That, plus retirements, accounts for almost all of the reported differences between stagnant median wages and greatly declining household income. In short, it is another manifestation of the employment to population ratio.

    Stagnant median income, growing at a nominal 1.5% to 2% is still not good, but I think it puts the urgent frame on the crisis of continued high unemployment, and weaning this country off of over dependence on oil.

    1. New Deal democrat

      Reading my comment above, I want to clarify that it Isn’t that Sentier explicitly found no decline in wages, they simply didn’t measure for it. They advised me that doing so would be very time intensive to do now.

      Also, my last paragraph should begin, “Stagnant median wages ….”. My whole point is that there is very significant difference between median wages and median income, and then I make the same mistake myself. D’oh!

  4. denim

    Let me see now.

    Previously issue stock options to the company officers.

    Encourage Bernanke to pump the stock market indirectly using QE.

    Announce company stock buy backs.

    Company officers exercise options….roll in the dough!

    No doubt about it. Obama-Bernanke-nomics is gush-up to them and trickle down to us.

  5. susan the other

    Did they say TINA 40,000 years ago when the glaciers were slowly cascading down the alpine valleys? No. That was not a viable concept. Nor is it today. TINA is a construct of interest rate whores, determined to deprive us so that they can gain. It is a game of theft.

    1. F. Beard

      TINA is the complacency of fools:

      “For the waywardness of the naive will kill them, and the complacency of fools will destroy them. Proverbs 1:32

  6. Richard Vague

    Calculating this using per capita income and adjusting for CPI, I agree with the authors comments on 2007 forward, but I show an increase from 2000 to the present.

Comments are closed.