11 October 2017

Very Good News About What Happened to Household Finances From 2013 to 2016

Great things happened to the finances of American households between 2013 and 2016. Given it is great news, it didn't get reported. So, you've come to a lowly blog to learn what happened.

In the 3 years from 2013 to 2016

Average monthly income for American families rose by $1,000 a month from the start to the end of this period. Think about what new options that gives families. 
Median income rose nearly $400 a month. A family making $48,000 in 2013 was making nearly $5,000 a year more by 2016. $5,000 a year is half the median global family income. Half. That's how much household income rose.

Breaking it down, though, we find some wonderful gains for groups who make less. This might be the coolest thing about this cool news.

Households headed by someone without a high school diploma make the least (compared to households with high school diplomas, some college, and college degrees). They make the least but their incomes rose the most. Median income for households without a high school diploma rose 15% and average income rose 25%!. (Households with college degrees saw median income rise just 2% and average income go up 15%.) That's a big - and needed - boost to the working poor.

Minority families make less than white families but their gains narrowed those gaps too. (There is still plenty of gap to close but at this rate it will close.) Average income for white families rose 14%. Average incomes for Hispanics rose 26%, for blacks they rose 22% and for other / mixed race families average incomes were up 20%. As with different levels of education, everybody gained but the gaps between groups narrowed. 

Finally, the rich did get richer. Families whose wealth put them in the top 10 percent had average income gains of 23% whereas families in the bottom half of net worth experienced gains of only 5 to 6%. I don't know how one would change that. If I have a million in wealth, my money is going to make money for me. Someone without wealth is not going to compete with that - particularly in a bull market for stocks and housing as it was from 2013 to 2016.

Net worth also rose spectacularly in this time.

Net worth fell for families from 2007 to 2010 (thanks to the Great Recession) and changed little from 2010 to 2013. From 2013 to 2016, though, average net worth rose $140,800. That's nearly $4,000 a month through this 36 month period. Median net worth rose only a tenth of that but still works out to a gain of nearly $400 a month for this period. 

To summarize, in the period between 2013 and 2016, at least half of households experienced a gain in net worth and income of $1,500 a year or more. The average of all households was an income gain of  more than $4,000 a year and a gain in net worth of nearly $50,000 a year.

I don't know how you turn that into bad economic news but somehow, sigh, we have. 

All the data for this post comes from this Bulletin from the Federal Reserve.

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