Americans are grappling with a third consecutive year of falling incomes, due to surging inflation.
Median household incomes have slumped to $74,580 in 2022, down 2.3 from the 2021 estimate of $76,330, representing a 4.7 percent drop since their peak in 2019.
The Census Bureau’s latest report reveals the ongoing economic challenges faced by American households since the onset of the Covid-19 pandemic, exacerbated by a four-decade high in inflation last summer due to supply chain disruptions and energy price spikes driven by the Ukraine conflict.
Earnings and inflation trends have shown improvement, thanks to a strong labor market and stabilizing price increases, Bill Adams, Chief Economist at Comerica Bank told the Wall Street Journal.
‘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 began to outpace inflation in December 2022, with inflation-adjusted wages increasing by about 3 percent in July, according to data from the Atlanta Fed Wage Tracker and the Labor Department.
This increase in household incomes can be attributed to workers re-entering the job market, and has contributed to solid economic growth in the current year, despite the Federal Reserve’s efforts to combat rising inflation through increased interest rates.
Inflation has also shown signs of moderation this year as the Fed implemented interest rate hikes, bringing the annual rate down from about 9 percent in June 2022 to around 3 percent in July.
The Census Bureau’s annual report card on US household financial well-being indicates that median household incomes in 2022 were highest in the West (around $82,900) and the Northeast (around $80,400), followed by the Midwest (about $73,100) and the South (about $68,200).
Nonetheless, the official US national poverty rate in 2022 remained similar to the previous year at 11.5 percent, encompassing approximately 37.9 million individuals living in poverty.
However, this measure doesn’t account for taxes paid by households or noncash government assistance, such as tax credits, housing subsidies, and free school lunches.
Median earnings in 2022 for all workers, adjusted for inflation, also saw a decline of about 2.2 percent, to approximately $48,000 compared to the previous year.
Among full-time, year-round workers, median earnings dropped 1.3 percent to about $60,100.
The total number of workers increased by approximately 2.8 million, with a notable rise of four million in the number of full-time, year-round workers, totaling 121.4 million.
The gender pay gap among full-time, year-round workers remained relatively stable, with a female-to-male earnings ratio of 84 percent in 2022.
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