GDP rising: Is middle-class prosperity rising, too? (+video)
The revival of prosperity, on a per-person basis in Middle America, is still a work in progress. On the heels of GDP news Friday, here are some core indicators of middle-class health.
The US economy grew in the final quarter of last year at a 2.2 percent rate, according to revised estimates that make 2014 the strongest year for economic growth since an initial postrecession rebound in 2010.
But a vital question is whether the growth, totaling 2.4 percent for the whole calendar year, is reaching and helping average Americans. America’s official gross domestic product (GDP) has never been higher, but is the middle class rising, too?
By several measures, the economic recovery has indeed been helping typical households, but middle-income families aren’t reaching any record level of prosperity.
Why the seeming disconnect? It’s not just that upper-income households have been receiving a larger share of national income. It’s also that the US population keeps growing each year. So as GDP rises modestly, after a historically deep recession, the fruits of the economy’s growth are being parceled out to more people.
The revival of prosperity, on a per-person basis in Middle America, is still a work in progress.
On the heels of the GDP news, released by the Commerce Department Friday, here are some core indicators of middle-class health:
Wages and incomes. The median family income has been rising lately, but when adjusted for inflation, it’s still below its level from the late 1990s to when the recession began in 2007, according to the White House’s annual “Economic Report of the President,” which was released last week.
The slow revival of wages has been a sore spot for working families. According to the same annual report, hourly wages for “production and nonsupervisory workers” rose 0.8 percent in 2014 and 0.7 percent in 2013, adjusted for inflation.
Over the longer term, inflation-adjusted income for a three-person family in the middle-income range is up 32 percent on average since 1970, according to analysis by the Pew Research Center.
Net worth. Middle-class families have lost significant ground when it comes to average wealth, compared with the prerecession peak. The typical middle-income household had a net worth (financial assets minus debts) of $96,500 in 2013, down from $158,400 in 2007, according to a periodic Federal Reserve survey of consumer finances.
Net worth is barely higher for this middle-income group than it was in 1983, on an inflation-adjusted basis, according to a Pew Research compilation of these Fed surveys.
Some good news for homeowners is that net worth has probably improved since the 2013 Fed survey. Home prices rose by 4.6 percent over the past calendar year, according to the Standard & Poor’s Case-Shiller national index of home prices.
Jobs and unemployment. The news here has been mixed, with the postrecession recovery for workers far from complete. Some broad indicators hint at the health of the job market.
The good news is that the official unemployment rate has fallen sharply, and faster than many economists predicted, to 5.7 percent of the workforce as of January. Average monthly job creation has been rising at least modestly in each year of the recovery, surpassing 200,000 per month last year for the first time since the recession (average gains of 260,000 per month in 2014). That’s according to Labor Department numbers compiled in the recent annual report by President Obama’s economic advisers.
But other indicators show lots of gaps in the recovery. In a monthly confidence survey by the Conference Board research group, fewer Americans say jobs are “plentiful” (20.5 percent) than “hard to get” (26.2 percent), as of January. And the unemployment rate is low partly because people are dropping out of the workforce due to discouragement. A stronger economy would bring more people back into the job hunt, forecasters say.
Put all these indicators together, and it’s little wonder that politicians from Mr. Obama to Republican presidential aspirants are focusing a lot of attention on middle-class economics.
Plenty of financial anxiety remains. A February Christian Science Monitor/TIPP poll, for example, found considerable concern by respondents that they or a member of their household might lose a job in the next 12 months. Some 35 percent of Americans in the $50,000 to $75,000 income level feel very or somewhat concerned about that, the poll found.
The GDP report Friday, by the way, showed the pace of economic growth cooling compared with an initial estimate (of 2.6 percent) that was released a month ago.
Still, despite that and other more recent head winds (including tough winter weather), some economists say a continuing trend of steady growth looks likely.
“Business and consumer spending are ... both still rising at decent rates,” according to a report Friday by Chris Williamson, chief economist at the financial information firm Markit. “Employers have continued to hire staff in impressive numbers, pointing to a general expectation of ongoing strong growth in 2015.”