Data Suggest Economic Outlook May Be Improving For Middle Class
STEVE INSKEEP, HOST:
On this Labor Day, we may have evidence that complicates our picture of the American middle class. We've heard throughout this year's presidential campaign of stagnant wages and struggle. It is a decades-long trend, but some numbers suggest the picture may at last be improving. There are numbers suggesting the middle class finally got a meaningful raise last year. David Wessel is with us once again. He's director of the Hutchins Center at the Brookings Institution and a contributing correspondent to The Wall Street Journal. Hi, David.
DAVID WESSEL: Good morning.
INSKEEP: What's the evidence?
WESSEL: Well, we'll get some official Census Bureau numbers next week, but there are a couple of census veterans at a small firm called Sentier Research that keep track of this on a month-to-month basis. And they say that, adjusted for inflation, household income at the statistical middle of the middle class may have risen more in 2015 than any single year in more than a decade. Their data suggests that in June 2016, the median household income was about $57,200, and that's 2.5 percent higher, adjusted for inflation, than it was a year earlier.
INSKEEP: OK, so not exactly going to go out and spend wildly on a party with that 2.5 percent raise, but it's a raise.
INSKEEP: And what's driving it?
WESSEL: Well, I think that one thing that's going on is that many more people have jobs. In the past couple of years, the economy's added more than 5 million jobs. That obviously boosts the incomes of households. Average wages have begun to rise a little bit, although much less than one would have expected, given how low the unemployment rate is. But I think it's important to remember that these numbers are adjusted for inflation. So when inflation is low, when the prices of food and energy fall, as they have been lately, that boosts the economist's measure of household income just as much as a raise does. But people don't often look at it that way.
INSKEEP: They just see that they don't have much more money than they used to have.
WESSEL: Correct. And there's another thing that's really important to remember. Even after this recent rebound, the income of the typical American household today is lower than it was in the year 2000, 16 years ago. So things are getting better, but we're still not back to where we were before the recession, let alone back to where we were in the year 2000.
INSKEEP: Which explains part of the frustration here, doesn't it - the long-term nature of this problem. And let me ask about another aspect of this, David. We're talking here about income - how much you make in a month or a year. What about household wealth, which crashed so much during the recession as people's home values went down and they lost retirement accounts and other things?
WESSEL: Right. So what we know from the big picture is that household wealth for all households together has gone up, and it's back close to where it was before the recession. House prices are rising again, and people who have money in the stock or bond markets have done pretty well. But that doesn't mean that people in the middle are doing well because much of the increase in wealth we've seen has gone to the people at the very top.
INSKEEP: What are Americans, particularly in that middle of the middle, saying about their financial situation? What are they feeling about it?
WESSEL: It's interesting. Public opinion polls show people are feeling a little better about the economy, but many of them still think the country is on the wrong track, which suggests to me that it's something other than the economy that is making people so anxious.
INSKEEP: Something other than. David, thanks very much.
WESSEL: You're welcome.
INSKEEP: That's David Wessel of The Brookings Institution.
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