In June of this year, we marked the fifth anniversary of the official end of the Great Recession as determined by the National Bureau of Economic Research (NBER). Note my use of the word "marked" over the more optimistic "celebrated". I say this after reading the report released today by Sentier Research: Household Income on the Fifth Anniversary of the Economic Recovery: June 2009 to June 2014. The press release in PDF format is available here at the Sentier Research website. The full report, 40 pages of richly detailed data on median household incomes, is available for a modest fee here, and I highly recommended a close study of the full report for anyone with a keen interest in the demographics of the U.S. economy.
The press release opens with an excellent overview, one which comes as no surprise to those of us who follow the monthly Sentier Research updates:
Based on new estimates derived from the monthly Current Population Survey (CPS), real median annual household income has fallen by 3.1 percent since the “economic recovery” began in June 2009. Adding this post-recession decline to the 1.8-percent drop that occurred during the recession leaves median annual household income now 4.8 percent below the December 2007 level. However, real median annual household income has begun to recover slowly during the past three years, June 2011 to June 2014. |
Before we dig into the new findings, let's have a quick look at an overlay of nominal and real (inflation adjusted) median household incomes since the turn of the century based on Sentier Research's monthly reports of the real, seasonally adjusted data.
Additional charts and a discussion of this 21st century timeframe are available at this permanent link, which I update monthly.
Today's new report from the Sentier Research includes breakdowns of the median data in multiple ways: by type of household, age of householders, employment status of householders, number of earners, race and ethnicity, education and much more.
In this commentary I'll focus on two of these broad areas: age and race/ethnicity. In follow-up commentaries, I'll explore some of the other findings.
The Breakdown by the Age of the Householder
The first table below gives us two snapshots in time (June 2009 and June 2014) of "All Households" and seven constituent age cohorts -- under 25, 75 and over, and the five 10-year cohorts in between. The two rightmost columns show the percent change in 1) the number of households per cohort and 2) the real (inflation-adjusted) median incomes of the cohorts. The incomes for 2009 have been adjusted for inflation using the Consumer Price Index.
The column chart below highlights the dramatic impact of the Baby Boom generation entering the 55-64 and 64-65 cohorts. We also see the substantially smaller imprint of the Echo Boom.
The columns above are further illuminated by a look at the ratio of births to the total population during the last century.
Since the end of the Great Recession, the real median income for "All Households" has shrunk 3.1% (-2.8% non-seasonally adjusted in the table above). As the next set of columns shows us, four of the age cohorts have fared statistically worse than the "All Households" category. Only the two oldest cohorts have experienced growth.
The "55 to 64" group has suffered the most shrinkage, a topic I'll look at more closely in a follow-up commentary. The 45 to 54 cohort, which has historically been the peak earning years (more on that topic here), has fared slightly worse than "All Households". The two "elderly" cohorts, a term I use respectfully as a member of this rapidly growing population, are the only two to show growth, with the 65 to 74 age group as the standouts. What we're seeing in both of the older groups is largely the result of two things:
- The positive impact of pensions and especially Social Security, which has had cost of living adjustments (COLAs) since 1975 with only two exceptions -- namely the first two deflationary calendar years of our June 2009-June 2014 focus.
- The well-documented trend toward working longer for the 65 and over crowd. As I've discussed in more detail here, approximately one in three of the 65-69 cohort is still in the labor force as is approximately one in five of the 70-74 cohort.
The Breakdown by Race and Ethnicity
The next table compares the households by race and ethnicity at the end of the Great Recession with the statistics five years later. As in the table above, the two rightmost columns document the change in the number of households and the change in real median household incomes for the cohorts.
A column chart shows the remarkable growth of two categories: "Other Race Combinations, Not Hispanic" and "Hispanic".
Although the chart above shows the comparative growth, it doesn't reveal the relative dimensions of the four categories within the overall household population. A pair of pie charts provides a visualization of the relative size of these cohorts in 2009 and 2014. The "White alone, not Hispanic" is by far the largest group, but it is the only one that has diminished in size. Hispanic households have overtaken Black households as the second largest group. Despite its greater growth, the "Other Combinations, Not Hispanic" category, which includes Asians, remains the smallest, at slightly more than half the number of the Hispanic households.
The Disturbing Race and Ethnic Divide
The next chart illustrates the deeply disturbing decline in the real median income for Hispanic and especially Black households. Hispanic household incomes have declined by double the percent of All Households. The decline for Black households is close to triple the All-Household decline.
The chart above is all the more disturbing when we look at the real household incomes themselves. In June 2009 the median annual income for Black households was 31.8% lower than the total median household income. Five years later the gap has widened to 45.2%. For Hispanic households, the 22.1% gap from "All Households" in June 2009 has risen to 24.3%.
In another commentary I'll explore additional aspects of Sentier Research's blockbuster report, including household composition and education. I'll also take a close look at the modest improvements in the the data since its post-recession trough in 2011.