Ironman at Political Calculations
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Summary
- Adjusted for inflation, December 2022's estimated median household income still represents a new record peak for this demographic characteristic.
- At $34,987, January 2023's nominal median household income represents a new record high for this measure.
- This month's significant upward income revisions from July through December 2022 reverse much of that effect.
Political Calculations' initial estimate of median household income in January 2023 is $80,440, an increase of $1,035 (or 1.3%) from the initial estimate of $79,405 in December 2022.
That's a substantial increase, but over half of the positive change we're reporting is the result of the Bureau of Economic Analysis' upward adjustments of aggregate income data earned in each month during the second half of 2022. For reference, the revised nominal estimate for December 2022 is $79,939, which accounts for $534 (or 51.6%) of the change from our original estimate.
These changes are incorporated in the latest update to Political Calculations' chart tracking Median Household Income in the 21st Century reflects the results of that revision, showing the nominal (red) and inflation-adjusted (blue) trends for median household income in the United States from January 2000 through January. The inflation-adjusted figures are presented in terms of constant January 2023 U.S. dollars.
Adjusted for inflation, December 2022's estimated median household income still represents a new record peak for this demographic characteristic, with real median household income falling because of a surge in January 2023's reported level of inflation.
The data revisions also affect the estimate of average personal income. At $34,987, January 2023's nominal median household income represents a new record high for this measure, which also exceeds its previous inflation-adjusted peak from December 2021.
This month's aggregate income revisions follow last month's substantial upward revisions of U.S. population estimates. Those revisions had effectively lowered our estimates of median household income and average personal earned income. This month's significant upward income revisions from July through December 2022 reverse much of that effect.
Analyst's Notes
We can most easily see the net impact all these revisions by comparing the updated nominal average personal income estimate for November 2022 with our original estimate for this month, prior to the population and aggregate income revisions. Our original estimate of November 2022's average personal earned income was $34,231, our revised estimate is $34,563, an increase of $332 (or +0.1%).
That small result compared to the large change we're seeing for January 2023's estimate suggests a significant acceleration for American income growth in the new year. Following the substantial data revisions we've seen during the past two months, we anticipate much smaller revisions for both population and aggregate income in the months ahead.
References
U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Population. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 24 February 2023. Accessed: 24 February 2023.
U.S. Bureau of Economic Analysis. Table 2.6. Personal Income and Its Disposition, Monthly, Personal Income and Outlays, Not Seasonally Adjusted, Monthly, Middle of Month. Compensation of Employees, Received: Wage and Salary Disbursem*nts. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 24 February 2023. Accessed: 24 February 2023.
U.S. Department of Labor Bureau of Labor Statistics. Consumer Price Index, All Urban Consumers - (CPI-U), U.S. City Average, All Items, 1982-84=100. [Online Database (via Federal Reserve Economic Data)]. Last Updated: 14 February 2023. Accessed: 14 February 2023.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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Ironman is the alias of the blogger at Political Calculations, a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics. We should acknowledge that Ironman is either formerly or currently, and quite possibly, simultaneously employed as some kind of engineer, researcher, analyst, rocket scientist, editor and perhaps as a teacher of some kind or another. The scary thing is that's not even close to being a full list of Ironman's professions and we should potentially acknowledge that Ironman may or may not be one person. We'll leave it to our readers to sort out which Ironman might behind any of the posts that do appear here or comments that appear elsewhere on the web!
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As someone deeply immersed in economic analysis and with a keen understanding of the intricacies of household income data, let's delve into the key concepts outlined in the provided article by Ironman at Political Calculations.
Firstly, the article discusses the estimation and analysis of median household income, emphasizing the importance of adjusting for inflation to gauge the real purchasing power of households. The January 2023 nominal median household income is reported to be $34,987, representing a new record high for this measure. Notably, this figure is subject to revisions based on data adjustments made by the Bureau of Economic Analysis (BEA).
The author highlights the substantial impact of income revisions from July through December 2022 on the overall trends. The initial estimate for January 2023 is $80,440, indicating an increase of $1,035 (or 1.3%) from the December 2022 estimate of $79,405. However, it's crucial to recognize that more than half of this positive change is attributed to the BEA's upward adjustments of aggregate income data for the second half of 2022.
The article further presents a chart tracking median household income trends in the 21st century, incorporating both nominal (red) and inflation-adjusted (blue) figures. The inflation-adjusted values are expressed in terms of constant January 2023 U.S. dollars. Despite the surge in nominal median household income in January 2023, the real median household income experiences a decline due to the reported level of inflation.
Moreover, the discussion extends to the implications of these income revisions on the estimate of average personal income. January 2023's nominal median household income is highlighted as a new record high, surpassing its previous inflation-adjusted peak from December 2021.
The article emphasizes the interconnectedness of income revisions and population estimates, noting that substantial upward revisions in U.S. population estimates from the previous month had effectively lowered estimates of median household income and average personal earned income. The significant upward income revisions from July through December 2022 reverse much of this effect, suggesting a potential acceleration in American income growth in the new year.
The author concludes with an anticipation of smaller revisions for both population and aggregate income in the coming months, considering the substantial data revisions observed in the past two months.
To reinforce these insights, the article references data sources, including the U.S. Bureau of Economic Analysis for personal income and outlays, compensation of employees, and population estimates. Additionally, the U.S. Department of Labor Bureau of Labor Statistics is cited for the Consumer Price Index (CPI-U), which is crucial for understanding the inflationary impact on real income.
In summary, this analysis by Ironman provides a comprehensive overview of the dynamics shaping median household income trends, underscoring the influence of data revisions and inflation on economic indicators.
