U.S. Incomes Fall for Third Straight Year
Surging inflation gobbled up household income gains last year, making 2022 the third straight year in which Americans saw their living standards eroded by rising prices and pandemic disruptions.
Americans’ inflation-adjusted median household income fell to $74,580 in 2022, declining 2.3% from the 2021 estimate of $76,330, the Census Bureau said Tuesday. The amount has dropped 4.7% since its peak in 2019.
The figures add to the picture of the economic challenges facing households since Covid-19 hit in early 2020. Inflation hit a four decade high last summer as the pandemic upended supply chains and the Ukraine war drove up energy prices.
This year could be different. Earnings and inflation trends have improved as a strong labor market and cooling price increases boosted household purchasing power, said Bill Adams, chief economist at Comerica Bank.
“Shifting into the present and into the future, the prospects are better for wages to make up for some of the ground lost during the last couple of years,” Adams said.
Wage growth for the typical worker outstripped inflation starting in December 2022, with inflation-adjusted wages rising about 3% in July, according to data from the Atlanta Fed Wage Tracker and the Labor Department.
Household incomes have also risen as more sidelined workers found jobs. Earnings growth has buoyed consumer spending, spurring solid economic growth this year despite the Federal Reserve’s rapidly increasing interest rates.
Inflation has also slowed steadily this year as the Fed hiked interest rates to a 22-year high to bring down inflation by slowing the economy. Annual inflation was 3.2% in July, down from 9.1% in June 2022.
The Census Bureau, in its annual report card on the financial well-being of U.S. households, said median household incomes in 2022 dropped by 3% to 5% in the West, Northeast and Midwest, while the South was unchanged.
White households saw median income decline by 3.6% in 2022 from the prior year to $81,100, while incomes in Black, Asian and Hispanic households were essentially unchanged. Asian households had the highest median income, at $108,700, compared with $62,800 for Hispanic households and $52,900 for Black households.
The report uses amounts that survey respondents said they received in 2022. To allow comparisons, amounts from earlier years are adjusted upward to reflect 2022 inflation.
The bureau said the official U.S. national poverty rate in 2022 was similar to the prior year at 11.5%, or about 37.9 million people living in poverty. For a four-person household, the threshold for meeting the definition of poverty last year was income of about $30,000.