This morning, the Census Bureau released its report on income, poverty, and health insurance for 2019.
While these data tell us very little about the 2020 COVID-19 pandemic and recession, the report provides some important lessons about what is now the most recent business cycle peak. Readers should not use these data to get a read on today’s economy, because the pandemic has unquestionably increased the poverty level, reduced incomes, and reduced access to health insurance. Also, there are significant concerns about data quality, given the fall in survey response rates. It appears that nonresponse biased income estimates up and poverty statistics down so the actual reported improvement should be taken with a grain of salt.
By 2019, the labor market had been recovering from the Great Recession for just about 10 years and the unemployment rate averaged 3.7% over the year. As expected because of the low unemployment rate and growing economy, earnings and incomes rose between 2018 and 2019. While the gains were quite healthy, in part due to slowing inflation, incomes had only just now recovered from significant losses in the Great Recession, and income gaps still loomed large.
Median men’s earnings for full-time workers rose 2.1% between 2018 and 2019, while median women’s earnings rose 3.0%. In 2019, typical full-time women workers were paid just 82.3% of typical full-time men workers, an insignificant improvement over 2018. Earnings for all workers, part- and full-time, rose 1.4% between 2018 and 2019. Among all workers, women’s earnings grew faster than men’s (7.8% versus 2.5%).
Because labor market earnings are a significant portion of family income for the vast majority of households and the U.S. economy saw increases in labor force participation in 2019, household incomes rose even faster than earnings. Median household income rose by 6.8% between 2018 and 2019. Similarly, non-elderly household income rose by 6.7% over the year. These are the fruits of a growing economy that was on its way to full employment before the current recession
Between 2018 and 2019, the official poverty rate fell 1.3 percentage points. In 2019, 10.5% of the U.S. population, or 34.0 million people, lived below the poverty line.
While any reduction in poverty or increase in income is a step in the right direction, many families have just barely made up for lost ground from the Great Recession by 2019. After correcting for a discontinuity in the income data to make years before and after 2013 comparable, median household income is now 6.5% above where it was in 2000. With the strong growth between 2018 and 2019, 2019 was the first year that non-elderly household income exceeded its 2000 level. In 2019, non-elderly household income was 4.3% above its 2000 level. This translates into only 0.2% average annual growth over the 19 years from 2000 to 2019.
Household income growth was strong across all racial and ethnic groups reported. Median Asian household income grew the fastest between 2018 and 2019 at 10.6%, followed by Black households at 8.5%, and Hispanic households at 7.1%. White, non-Hispanic household income grew at 5.7% over the year. (This analysis uses Black alone or in combination whereas the Census reports data for Black alone.)
For the first time in the recovery from the Great Recession, Black households exceeded their 2007 income levels in 2019. As strong as many broad measures of the U.S. economy were in 2019, median Black household income was just 1.4% higher than it was in 2000. This is a gain of less than $700 in total between 2000 and 2019. Black household income is just 61% of white household income, lower than it was in 2000, when it was 65%. These persistent racial disparities—deeply rooted in historical and ongoing social and economic injustices—contributed to greater susceptibility to the pandemic and the ensuing recession for Black and Hispanic workers and families.
This report shows that the gains to a growing economy take much longer to reach those workers and households, and much more income growth is needed to close persistent racial disparities and combat decades of rising inequality. Now, because of the pandemic, we will once again be trying to recover lost ground for years to come. Policymakers should take heed of the policies that worked to help produce positive outcomes in 2019 and help get us back on the road to full employment sooner rather than later.