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Family income is now the highest since 2002

Rick Newman
Senior Columnist

The defining feature of the 21st century US economy has been stagnant income, which is why millions of American families feel like they’re falling behind.

But the story appears to be changing. Research firm Sentier Research reports that median household income in April finally surpassed the level of January 2000, the starting point for its data on family income. In plain English, that means the living standards of the typical family are now a bit higher than they were at the turn of the century, 17 years ago.

Sentier calculates a monthly index representing median household income, based on Census Bureau data, starting at 100 in January of 2000. Since it’s an index, it’s adjusted for inflation and represents the real earning power of a typical family. The index drifted slightly above 100 a few times leading up to the 2008 financial meltdown, but mostly went sideways during the George W. Bush administration. Then it plunged beginning in 2009, with a long recovery beginning in 2011.

The latest reading in the Sentier index is 100.9, the first time it’s been above 100 since 2008. That number matches the previous high, from 2002, which means family income will hit a new high if it rises in May. The red line on the chart below represents household income, while the other line shows the percent of the US labor force considered unemployed or underemployed.

Incomes only tend to rise when the unemployment rate drops, because it takes a tightening labor market to force employers to pay their workers more. President Trump has taken credit for a steadily improving job market, but the Sentier data shows incomes have been improving considerably since the end of 2014. That’s late in the recovery, compared with other business cycles, but other than that, the economy seems to have recovered from the 2007-2009 recession in fairly typical fashion.

Trump came into office at a fortuitous time, when the labor market was just beginning to tighten and incomes were finally returning to prior levels. Trump has an aggressive agenda for “bringing back” manufacturing jobs and doing other things to stimulate the economy, but the increasingly good news on jobs and incomes suggests he may not have to. “Don’t break it” is a good approach to the economy when things are working well, and Trump could end up with good marks on the economy if he simply lets it do what it’s already doing: heal.

Confidential tip line: rickjnewman@yahoo.com

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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman