The incomes of middle-class Americans rose last year to the highest level ever recorded by the Census Bureau, as poverty declined and the scars of the past decade’s Great Recession seemed to finally fade.
Median household income rose to $59,039 in 2016, a 3.2 percent increase from the previous year and the second consecutive year of healthy gains, the Census Bureau reported Tuesday. The nation’s poverty rate fell to 12.7 percent, returning nearly to what it was in 2007 before a financial crisis and deep recession walloped workers in ways that were still felt years later.
The new data, along with another census report showing the rate of Americans lacking health insurance to be at its lowest ever last year, suggest that Americans were actually in a position of increasing financial strength as President Trump, who tapped into anger about the economy, took office this year.
Yet the census report also points to the sources of deeper anxieties among American workers and underscores threats to continued economic progress.
Middle-class households are only now seeing their income eclipse 1999 levels.
Inequality remains high, with the top fifth of earners taking home more than half of all overall income, a record. And yawning racial disparities remain, with the median African American household earning only $39,490, compared with more than $65,000 for whites and over $81,000 for Asians.
Economists and policy experts wonder whether the gains will continue. The median income had surged since 2014 because millions more Americans found full-time jobs, but there is little evidence that employers are rushing to offer raises to those who already are employed. Without more wage gains, momentum could slow.
Meanwhile, the rate of people without health insurance declined only slightly last year, to 8.8 percent, the Census Bureau said.
The Trump administration is widely expected to cut back on programs that promote enrollment under the Affordable Care Act, meaning that the ranks of the 28.1 million uninsured Americans might grow.
“There’s a danger that this is as good as it gets,” said Peter Atwater, president of Financial Insyghts. “We are already at a 16-year low in unemployment. The likelihood of significant job growth from here is limited.”
Trump promised that a combination of tax cuts, infrastructure investment packages, renegotiated trade deals and the repeal of Obama administration regulations would deliver a burst of job creation and attendant economic growth.
So far, no such boom can be found.President Trump has a tendency to say he is responsible for job growth, rather than U.S. businesses or the American people. (Meg Kelly/The Washington Post)
In Trump’s first seven months, the U.S. economy has added about 25,000 fewer jobs per month than it did during the last seven months of Barack Obama’s presidency. In a more positive sign, the gross domestic product grew at an annual rate of 3 percent in the second quarter of 2017, according to a federal report issued in late August.
Much of Trump’s agenda remains pending, however, either awaiting action by his administration or bogged down in Congress. And while most economists think it is too early in Trump’s term for his administration to have a measurable effect on the economy, there are real doubts about whether he will be able to enact his agenda, particularly after his health-care effort died in the Senate. Both his tax reform and infrastructure efforts face significant hurdles in Congress.
“Where is the extra progress going to come from? You have growing uncertainty that Washington will be able to create any sort of tax relief or infrastructure plan,” Atwater said.
For now, though, the economy is returning to pre-recession levels, as indicated by several benchmarks. The national unemployment rate was 4.4 percent in August, just about the same as pre-recession levels. And in July, U.S. employers had generated enough jobs to restore national employment to where it stood before the recession started in 2007, even after accounting for population growth in the intervening decade.
The household earnings are welcome news for the middle class, which, after leaps forward in the 1990s, struggled amid the slow overall growth of the early 2000s and was devastated by the recession.
The income increase extended to almost every demographic group, Census Bureau officials said. The figure the agency reported Tuesday was the highest on record. The agency reports that in 1999, median household income, adjusted for inflation, was $58,655. Agency officials cautioned that the bureau changed its methodology in 2014, complicating an exact historical comparison.
Julian West, of Phoenix, is one of the many Americans whose lives improved dramatically last year.
For much of the recovery, he could find only “dead-end” minimum-wage jobs at carwashes and discount stores.
“I was really struggling,” said West, 44, who was forced to move back in with his parents.
In 2016, he went to a temp agency in Phoenix and landed a job that paid $18 an hour. It did not last, but the recruiter called again and moved him to the job he has now at BB&T Bank monitoring car-loan payments and repossessions. The job pays $16 an hour, with ample opportunity for overtime pay, he said.
“I’m slowly saving and paying off bills,” West told The Washington Post. He recently moved into a small studio apartment, now that he’s earning $35,000 a year. “I’ll be middle class again if I keep my spending to bare bones.”
West credits Obama with bringing the economy back. He did not vote for Trump, but he hopes someone with the business experience of the president can help the working poor.
Many Americans are optimistic, as West is, that their fortunes will continue to improve. A Gallup poll released Tuesday found that 64 percent of Americans think their “standard of living” is improving, the highest percentage since the financial crisis, while only 19 percent feel their standard of living is declining.
“Today’s census report is unambiguously good news: on income, on poverty and on health insurance,” said Bob Greenstein, the founder and president of the Center on Budget and Policy Priorities, a left-leaning think tank. “The goal should be to continue this progress.”