Six Years Later, Real Median Household Income Still Below 2007 Levels

The Bureau of Labor Statistics reported last week that real average weekly earnings (that’s earnings adjusted for price change) in the U.S. economy declined 0.5% in July from June of this year. (Source: Bureau of Labor Statistics, August 15, 2013.)

But this is just the monthly difference in real wages. I tend to look at the bigger picture.

According to Sentier Research’s monthly Current Population Survey, real median household income in the U.S. economy is down 4.4% from June 2009. In June of this year, median household income was $52,098. In June of 2009, it was $54,478. (Source: Sentier Research, August 21, 2013.)

Going back further, in December of 2007, when the U.S. economy was “officially” recognized as being in a recession, the median household income was $55,480. Yes, almost six years after the Great Recession started, real median household income is still down 6.5%.

In the midst of all the false optimism about economic growth, one question is going unasked. The Social Security Administration reports that in 2011, 66.6% of wage earners in the U.S. economy had a net compensation of less than or equal to $41, 211.36, adjusted for price change. (Source: Social Security Administration web site, last accessed August 23, 2013.) This means that two-thirds of Americans earn less than the country’s stated median income.

Wages are the very basic phenomenon that drive consumer spending. So the question that’s going unasked is: can the U.S. economy really see economic growth when wages are declining? My answer: of course not.

The illusion of economic growth created by the stock market is just that: an illusion. If the U.S. economy was indeed witnessing economic growth, real wages would reflect this. Unfortunately, the decline in real wages will simply lead to a pullback in consumer spending in the U.S. economy—something many major retailers are already complaining about.

What He Said:

“Even the most novice investor can now read the chart of the Dow Jones U.S. Home Construction Index and see that it is trading at its lowest level in five years. If, like me, you believe that stocks are an indication of what lies ahead, this important index is telling us housing prices are headed to 2002 levels! What would that do to the economy? Such an event would devastate the U.S.” Michael Lombardi in Profit Confidential, December 4, 2007. That devastation started happening in the first quarter of 2008.