American households finally earn more than they did in 1999, but poverty and inequality are on the rise

From today’s Los Angeles Times “Business” section by Don Lee:

Income inequality

After a long period of plodding economic growth, significant earnings gains over the past two years have finally enabled the average American household to surpass the peak income level it reached in 1999.

The median household income in the U.S. climbed to $59,039 last year, up 3.2% from 2015 after adjusting for inflation, the Census Bureau reported Tuesday.

That comes on the heels of a 5.2% jump in income in 2015, the highest annual percentage increase on record.

The back-to-back increases brought the median income — in which half of households earn more and half less — above the previous peak of $58,665 in 1999.

The median household income in California rose 3.4% last year to $66,637, surpassing the earlier high of $65,852 in 2006.

The national measure of poor people in America also improved significantly for the second year in a row: The poverty rate fell last year to 12.7%, from 13.5% in 2015 and 14.8% in 2014.

That translates into a decline of about 6 million people in poverty over the last two years.

The latest poverty rate is comparable to 2007, the year before the Great Recession took hold. But there were still 40.6 million poor people in the nation last year. A household with two adults and two children is considered poor if their total income was less than $24,339.

“We consider 2015 and 2016 to be the turning point on the real median household income front, as employment and wage gains, combined with modest consumer price inflation, have boosted the well-being of many American households,” said Chris G. Christopher Jr., executive director of IHS Markit, an economic research firm.

“Real median household income has finally completed its nine-year slog of digging out of the ditch,” he said.

But the annual Census report was not as glowing beneath the surface, and economists are concerned that budget proposals curtailing things like food stamps could thwart continuing progress.

The impact of Trump’s promised tax reform could also change trends for the poor and middle class.

While the latest data showed solid gains for blacks and Latinos and younger adults, median incomes for full-time, year-round workers, men and women, were essentially flat in 2016, reflecting sluggish wage growth that has persisted into this year.

What’s more, a key measure of income disparity remains at the highest level in at least a half century.

And although the median income for urban dwellers jumped 5.4% last year to $61,521, households in rural areas saw their earnings basically stagnate at less than $46,000.

Read the entire article here.