Support the Wall Street Examiner! Choose your level of support to receive a free proprietary report as my thanks. Click the button below to see your options. Become a Patron!

Median Household Income Rose 5.2%! Yeah. PLA says That’s The Ticket

New York Times- Binyaming Applebomb-  Household incomes for American families rose strongly in 2015, breaking a yearslong pattern of income stagnation. The median household’s income in 2015 was $56,516, an increase of 5.2 percent over the previous year — the largest one-year rise since at least 1967, the Census Bureau reported on Tuesday.

Wowza! We’re on our way now!

The income gains represent an important turning point in the recovery from the 2008 recession, showing that recent economic gains are being distributed more broadly.

“It has been a long slog from the depths of the Great Recession, but things are finally starting to improve for many American households,” said Chris G. Christopher Jr., director of consumer economics at IHS Global Insight.

The economic recovery, however, remains incomplete. The median is still 1.6 percent lower than in 2007, before the recession. It also remains 2.4 percent lower than the peak reached during the boom of the late 1990s…

Still, most economists saw the report as remarkably positive. In an exuberant tweet, Jason Furman, chairman of the White House Council of Economic Advisers, called it “unambiguously the best” such census data “ever.” Household incomes in 2015 were higher than when President Obama entered office, and it is likely that the gains are continuing during his final year in office.

Binny usually covers the Fed, and usually gets said coverage wrong, but this piece probably wins the Pull-it-sir for breathlessness.

Liquidity moves markets!

Follow the money. Find the profits! 

Now, here are the facts straight from the horse’s (Census Bureau’s) mouth.

Median household income was $56,516 in 2015, a 5.2 percent increase from the 2014 median in real terms, but 1.6 percent lower than the median in 2007, the year before the most recent recession, and 2.4 percent lower than the median household income peak that occurred in 1999.

So far, so good.

The 2015 real median earnings of men ($51,212) and women ($40,742) who worked full time, year round increased 1.5 percent and 2.7 percent, respectively, between 2014 and 2015.

Oops.

So the 5.2% increase in median household income came from the man of the house earning 1.5% more and the woman of the house earning 2.7% more? That’s some math!

If a couple earned an average of 1.9% more, where did the other 3.3% increase come from?

The report shows the number of men and women working. Could that have been the source of the gain in household income? Nope. The number of men working increased by just 2.3% and the number of women working rose by 1.9%. Obviously some of those formed additional households. So an increase in the number of working persons per household could not account for the 5.2% in median income per household.

Working women did see an increase of 6.4% in their total earnings. But women working full time had income gains of only 2.7%. Apparently many women took a second job to help keep their households afloat. Is needing a second job an improvement in economic well being for those households?

We know that many households have a single wage earner, and that many of those are headed by women. But men earned only 2.3% more. Considering the 6.4% increase for women, even if the ratio of households headed by men and those headed by women were 50/50, that would only mean an average earnings gain per household of 4.3% thanks to women taking second jobs.

The Census Bureau lists 15 sources of household income.

1. Earnings
2. Unemployment compensation
3. Workers’ compensation
4. Social security
5. Supplemental security income
6. Public assistance
7. Veterans’ payments
8. Survivor benefits
9. Disability benefits
10. Pension or retirement income
11. Interest
12. Dividends
13. Rents, royalties, and estates and trusts
14. Educational assistance
15. Alimony
16. Child support
17. Financial assistance from outside of the household
18. Other income

The report doesn’t break out the dollar amount of any source other than earnings. Since earnings did not account for the 5.2% gain in household income, what did? None of these other sources could have been the source. Virtually none of them would have increased by that much, and none of them would apply to more than a fraction of total households. Therefore they would not have had much impact on the median of all households.

Given these facts, the 5.2% increase is “a riddle, wrapped in a mystery, inside an enigma.” Churchill used that phrase to describe politics in the Soviet Union. I think that’s an apt analogy for US government statistics.

Assuming that 5.2% increase wasn’t just a fabrication or a data error, I’m still wondering, where it came from. It’s not earnings and not the increase in the number of men and women working. It’s not the other sources of income. By deduction, there could only be one source of the increase– an increase in household size. For instance, if Junior is making $28,000 a year working as an assistant manager at McDonald’s, and he or she decides that the rent is too damn high, he moves back in with Mom and Dad. Voila, if household income increases by 50% in 6% of households, that would account for the increase not caused by the increase in individual earnings.

Does that mean that households were actually doing better 5.2% better?

No. But the headlines sound good.

Yeah, that’s the ticket.

Try Lee Adler's Technical Trader risk free for 90 days! Follow the money. Find the profits!

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

  2 comments for “Median Household Income Rose 5.2%! Yeah. PLA says That’s The Ticket

  1. September 14, 2016 at 9:49 am

    Nobody can wring a confession out of lying stats like you do.  Bravo!

  2. September 16, 2016 at 7:23 pm

    Wellbeing is more important and I’ll take my iPhone, HD TV, streaming video, economic stability…

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.