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Title: U.S. Incomes Fail to Grow for Second Year in a Row, Census Figures Show Households facing highest inflation in decades recorded median 2021 income of $70,800
Source: [None]
URL Source: https://www.wsj.com/articles/u-s-in ... w-11663079099?mod=hp_lead_pos4
Published: Sep 14, 2022
Author: Paul OverbergF and John McCormick
Post Date: 2022-09-14 08:48:21 by Ada
Keywords: None
Views: 9

Americans as a whole have experienced two years in a row of flat or declining household income, new government data showed Tuesday, reflecting the pandemic’s lingering economic pain as inflation is also taking the largest bite out of pocketbooks in four decades.

In its annual assessment of the nation’s financial well-being, the Census Bureau said median household income of about $70,800 in 2021 wasn’t different in a statistically significant way from the inflation- adjusted 2020 estimate of about $71,200.

The lack of any real growth for 2021 follows a decrease in incomes recorded in 2020, the first year of the pandemic. Totals in 2020 and 2021 were boosted by significant government spending in response to the pandemic that helped reduce poverty.

The report, which offers insight into how households fared during the pandemic’s second year, arrives ahead of a midterm election where inflation and the economy are expected to be top issues.

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The Labor Department said in a separate report Tuesday that the consumer-price index, a measure of what consumers pay for goods and services, rose 8.3% in August from the same month a year earlier, down from 8.5% in July.

The road ahead for the U.S. economy remains uncertain, with the Federal Reserve aggressively raising interest rates while trying not to trigger a recession. Supply-chain delays and a lack of workers continue to challenge economic growth.

“In our view, the combination of continued Fed tightening and elevated inflation, which has caused real personal income to contract in recent quarters, will lead to retrenchment in real consumer spending beginning in the first quarter of 2023,” said Tim Quinlan, a senior economist at Wells Fargo & Co. “Despite a slight softening in the sting of inflation giving way to an improvement in purchasing power, households continue to rely on their balance sheets to spend.”

The Census Bureau said incomes were highest in the West (about $79,400) and Northeast (about $77,500), followed by the Midwest (about $71,100) and the South (about $63,400).

The report uses amounts that its survey respondents said they received in 2021. To allow for comparisons, amounts reported in earlier years are adjusted upward to reflect inflation since those years.

The bureau said the official poverty rate in 2021 was 11.6%, or about 37.9 million people living in poverty. Neither the rate nor the total was statistically different from 2020. For a four-person household, the threshold for meeting the definition of poverty was about $27,740 in 2021.

The official poverty measure doesn’t reflect how much a household pays in taxes, and it also omits noncash government aid such as tax credits, housing subsidies and free school lunches. A broader measure that accounts for such expenses and aid fell last year to 7.8%, a drop of 1.4 percentage points from 2020. The rate was the lowest since the measure was introduced in 2009.

The unofficial poverty rate also fell sharply for children, dropping to 5.2% from 9.7%, reflecting the effect of an expanded child tax credit. Various tax credits lifted 9.6 million people of all ages above the poverty line last year, according to Liana Fox, assistant division chief for social and economic statistics.

One group that saw a slight uptick in poverty was those 65 and older. “A larger share are on fixed income and I think one thing that’s very likely happening is that they are on fixed incomes that aren’t keeping pace with inflation,” Ms. Fox said.

The bureau said the proportion of Americans with health insurance for some or all of 2021 was 91.7%, up 0.4% from 2020. About 27.2 million Americans didn’t have health insurance during any part of 2021, according to the survey.

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SIGN IN Earnings—mostly wages and salaries—showed a mixed picture. Median earnings in 2021 for all workers rose 4.6% to about $45,500 from the previous year. However, among workers who worked full time, year-round, median earnings dropped 4.1% to about $56,500. The report said the decline could be due in part to gains by lower-paid workers or the effects of inflation. The total number of workers remained about the same at about 168 million, but the number of full-time, year-round workers grew by 11 million to 117 million.

The 2021 female-to-male earnings ratio among full-time, year-round workers was 84%, not significantly different from 2020.

“Asian households had the highest median income in 2021, followed by non-Hispanic white households and Hispanic households,” Ms. Fox said. “Black households had the lowest median income. None of these estimates were statistically different from 2020.”

U.S. shoppers are contending with higher prices as the consumer-price index rose 8.3% in August from a year earlier. PHOTO: SARAH SILBIGER/REUTERS Overall, income shifted toward higher-income households. The Gini index, a summary measure of how incomes are distributed, rose 1.2% from 2020, the first significant year-over-year increase since 2011. For example, a household at the 90th income percentile received 13.5 times as much as one at the 10th percentile, compared with 12.9 times as much in 2020.

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Subscribe Using other measures, the bureau attributed the shift to falling incomes among lower-income households rather than major gains by upper-income households.

The top fifth of households—with incomes above about $149,100—collected 52.7% of household income, while the top 5% alone—with incomes above about $286,300—collected 23.5%. The lowest fifth of households—making less than about $28,000—collected 2.9%. The second fifth—with incomes from about $28,000 to $55,000—collected 8%.

The report focuses on pretax income of all kinds, including cash forms of government aid like unemployment compensation, but it doesn’t include last year’s stimulus checks and beefed-up tax credits. Using an alternate calculation that included such income as well as taxes paid, the bureau found that median household income fell 1% last year, a change that it said wasn’t statistically significant.

Write to Paul Overberg at Paul.Overberg@wsj.com and John McCormick at mccormick.john@wsj.com

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