US household incomes had their fastest growth on record last year

Impressive figures are welcomed by Democrats who say they disprove Donald Trump's message of economic gloom

Jim Tankersley
Tuesday 13 September 2016 20:35 BST
New figures show the fastest increase in household incomes ever recorded by the federal government.
New figures show the fastest increase in household incomes ever recorded by the federal government. (AP)

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The incomes of typical Americans rose in 2015 by 5.2 percent, the first significant boost to middle-class pay since the end of the Great Recession and the fastest increase ever recorded by the federal government, according to the Census Bureau.

In addition, the poverty rate fell by 1.2 percentage points, the steepest decline since 1968. There were 43.1 million Americans in poverty on the year, 3.5 million fewer than in 2014.

The share of Americans who lack health insurance continued a years-long decline, falling 1.3 percentage points, to 9.1 percent.

The numbers, from the government's annual report on income, poverty and health insurance, suggest the recovery from recession is finally beginning to lift the fortunes of large swaths of American workers and families. The Obama administration and its allies immediately hailed them in glowing terms.

"This exceeds the strong expectation that I already had," Jason Furman, chairman of Obama's Council of Economic Advisers, said in an interview, in which he called the income report the strongest ever from the Census Bureau. "The news here is the growth rates. I've read the last 21 reports, including this one. I have never seen one like this, in terms of, everything you look at is what you'd want to see or better."

Republicans discounted the improved outlook, saying the overall numbers remain weaker than they should be.

"Today's report is another disappointing confirmation that too many Americans are still struggling to provide for their families and reach their full potential. The federal government invests billions of dollars each year in programs to help low-income Americans - but more than 43 million people continue to live in poverty. It shouldn't be this way in America," House Ways and Means Committee Chairman Kevin Brady, R-Texas, said in a statement.

The numbers appear to run counter to a key narrative in the 2016 presidential campaign, pushed by Republican nominee Donald Trump, that America is in decline and working people's lives are getting worse. Mr Trump frequently cites median income stagnation, relying on previous Census data, on the campaign trail. His campaign had not released a statement on the new Census report as of midday Tuesday.

Democrat Hillary Clinton has argued that the economy is improving under President Obama but that working families still need more help to get ahead. Her campaign said Tuesday that the Census numbers reinforce that view.

"These are really positive numbers by and large. They show real progress," said Jacob Leibenluft, a senior policy adviser to the Clinton campaign. He added: "This is definitely at odds with the picture that Trump provides."

Real median household income was $56,500 in 2015, the bureau reported, up from $53,700 in 2014. The gain was a combination of rising wages in the economy - spurred by a labour market where unemployment is falling and employers are being forced to compete more for workers - and low inflation.

The figures provide a boost for Ms Clinton's embattled campaign
The figures provide a boost for Ms Clinton's embattled campaign (Getty)

The 5.2 percent increase was the largest, in percentage terms, ever recorded by the bureau since it began tracking median income statistics in the 1960s. Bureau officials said it was not statistically distinguishable from five other previous increases in the data, most recently the 3.7 percent jump from 1997 to 1998.

Incomes increased for men and for women and across racial and ethnic groups. They grew most for the lowest-earning workers and least for the highest-earning ones, though all income groups saw improvement.

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"The highest income growth was in the bottom fifth" of workers, "which is very welcome news," said Lawrence Mishel, president of the liberal Economic Policy Institute think tank.

The only weak spots were geographic: Median incomes rose by 7.3 percent for workers who live in major cities. For workers in rural areas, they did not rise at all.

All told, the gains brought median incomes nearly back to their levels before the recession, after adjusting for inflation, though they remain below 1999 levels.

Several measures had suggested that 2015 was strong for wage growth. Other indicators had pointed to an improvement for the Americans who are the worst off. The unemployment rate had declined to 4.9 percent as of last month.

Since 2014, increases in wages have accelerated for the one in five workers earning the least, according to new research by Bank of America. In this group, wages are now increasing at roughly 4 percent year over year.

Last week, the Agriculture Department released its annual data on hunger in the United States, showing that food insecurity declined substantially last year for the first time since the recession.

The share of food-insecure households was 12.7 percent last year, down from 14 percent in 2014. Before 2014, food insecurity had remained stubbornly persistent, improving only modestly from an apex of 14.9 percent in 2011. The Agriculture Department defines food security as having access to "enough food for an active, healthy life."

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