America’s Middle-Class Seeing Real Income Gains
Market-moving economic data is reported on a regular cadence, monthly in many cases. Government data is issued for unemployment trends, housing starts, jobless claims, consumer confidence, consumer price inflation, manufacturing data (ISM/PMI), etc, and oftentimes the initial readout is later revised up or down. Some recent data has shown a slowdown in the pace of job growth, capital spending and manufacturing trends, but the US consumer, accounting for roughly 70% of spending, is believed to be on solid footing given historically low unemployment near 3.7% and wage gains in the 3-4% range.
To further the point about the health of the US consumer, the Wall Street Journal recently published an article by Stephen Moore titled, “Trump’s Middle-Class Economic Progress.” Article.
The data cited in the article comes from the US Census Bureau’s monthly surveys, and further statistics are presented by longtime former census income-research specialists at a nonpartisan group called Sentier Research. According to the Census Bureau, for the 12-months ending in July 2019 real median household income climbed to better than $65,000, which is the highest level ever and more than $4,100, or 6.8%, higher than when President Trump took office nearly three years ago. This expansion of household income is far better than what workers received during the GW Bush (+$401) and Obama (+$1043) years. What’s more, this upbeat household income data does not factor in the 2017 tax cuts, which the Heritage Foundation believes saved average households around $1,400 in 2018.
Sentier analyzes the Census Bureau’s monthly data and presents its findings roughly 6-12 months before official data is announced, so it too is likely to be revised. That said, their data has been a solid indicator.
Household incomes took a very long time to recover from the financial crisis in 2008-2009, bottoming in mid-2011 at just under $56,000. The latest income figure from July 2019 is 16.6% higher than the bottom eight years ago, and a strong signal that US consumers continue to spend. Retail sales trends in the US have shown a nice surge in recent months as well (Aug +0.4% month-over-month and +4.1% year-over-year; July +0.8% month-over-month and +3.6% year-over-year). Therefore, the household income data jives with consumer spending data, keeping most economists’ forecasts for a near-term recession in the low probability range.