The U.S. Census Bureau published some data on household incomes Tuesday. Off the top, the figures are encouraging:
The excitement of some analysts reporting these as a major breakthrough along the trend is understandable; notionally, 2016 U.S. median household income has finally surpassed the previous peak, recorded in 1999. Back then, median household income (adjusted for official inflation) stood at USD58,665 and at the end of 2016, it registered USD59,039. Note: italics denote points of importance, relevant to the analysis below.
As this chart from MarketWatch clearly illustrates, notionally, we are in the ‘new historical peak’ territory:
Alas, notional is not the same as tangible. And here are the reasons why the tangible matters probably more than the notional:
1) Consider the following simple timing observation: real incomes took 17 years to recover from the 2000-2012 collapse. And the Great Recession, officially, accounted for only USD 4,031 in total decline of the total peak-to-trough drop of USD 5,334. Which puts things into a different framework altogether: the stagnation of real incomes from 1999 through today is structural, not cyclical. The ‘good news’ today is really of little consolation for people who endured almost two decades of zero growth in real incomes: their life-cycle incomes, pensions, wealth are permanently damaged and cannot be repaired within their lifetimes.
2) The Census Bureau data shows that bulk of the gains in real income in 2016 has been down to one factor: higher employment. In other words, hours worked rose, but wages did not. American median householders are working harder at more jobs to earn an increase in wages. Which would be ok, were it not down to the fact that working harder means higher expenditure on income-related necessities, such as commuting costs, childcare costs, costs for caring for the dependents, etc. In other words, to