U.S. Household Incomes Rose in 2016 to New Record -- Update

By Ben Leubsdorf Features Dow Jones Newswires

Incomes in the U.S. jumped again last year, allowing the average American household to finally recover the ground it lost in the past two recessions.

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The median household income last year was $59,039, up an inflation-adjusted 3.2% from 2015, the Census Bureau said Tuesday. It was a new high for the figure, surpassing the previous peak for household income reached in 1999.

Last year's rise was the second significant jump in a row, coming after years of slipping or stagnant incomes following the 2007-09 recession.

The official U.S. poverty rate in 2016 was 12.7%, meaning 40.6 million Americans were living in poverty, the agency said. That was down from 13.5% in 2015. It was 11.3% in 2000, ahead of the 2001 recession, and 12.5% in 2007.

Some 8.8% of Americans lacked health-insurance coverage for all of last year, compared with 9.1% in 2015. Insurance coverage has expanded in recent years as more workers found jobs and provisions of the 2010 Affordable Care Act took effect.

Tuesday's report was based on survey data collected earlier this year for 2016, the final full year of the Obama administration. It excluded some Americans including prisoners, nursing-home residents, some active-duty military personnel and residents of Puerto Rico and other U.S. territories outside the 50 states and the District of Columbia.

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Price growth picked up last year, eating into income gains, though U.S. inflation overall remained tame. Consumer prices rose 1.3% in 2016, up from a 0.1% gain in 2015, according to Labor Department data.

A tightening labor market has boosted many Americans' earnings and helped lift families out of poverty by providing more workers with jobs and forcing some employers to raise pay to attract and retain employees. In addition, a number of states raised their minimum wages over the past two years, boosting compensation for some at the bottom of the pay scale.

Still, wage and price growth remain subdued despite low unemployment: 4.7% at the end of 2016, down from its recession-era high of 10%.

The economic expansion that began in mid-2009 is now the third longest in U.S. history, though the pace of growth has been modest by historical standards. Some government and private forecasters have warned that sluggish productivity gains could continue to restrain income and economic growth in the years ahead.

The postrecession recovery for incomes has been slower than the rebound in prices for assets such as stocks; the net worth of U.S. households and nonprofits first surpassed its prerecession level in 2012, according to Federal Reserve data not adjusted for inflation. Household debt also has reached new highs, though it remains below prerecession levels when compared with the size of the overall economy.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

WASHINGTON -- Income for the average American household reached a new high last year for the first time this century, a milestone in the slow and volatile recovery from two recessions and financial bubbles that crossed over three presidencies.

Median household income last year was $59,039, up an inflation-adjusted 3.2% from 2015, the Census Bureau said Tuesday. It was a new high for the figure, surpassing the previous peak for household income reached in 1999, though the agency cautioned against direct historical comparisons due to methodology changes over time.

The poverty rate fell last year, as did the share of the population without health insurance, while some measures of income inequality increased somewhat.

Last year's rise for household incomes was the second significant jump in a row, coming after years of slipping or stagnant incomes following the 2007-09 recession, which was associated with the housing boom and bust. A technology boom and bust marked the end of the previous expansion which led to the 1999 peak.

Income growth in 2016 was broad across all age and racial groups, for both native-born and immigrant households, inside cities and outside metropolitan areas.

The economic expansion that began in mid-2009 is now the third longest in U.S. history, though the pace of growth has been modest by historical standards. As the expansion proceeds, a tightening labor market is boosting the earnings of many American households and helping to lift families out of poverty by providing more workers with jobs and forcing some employers to raise pay to attract and retain employees. The jobless rate fell to 4.7% at the end of 2016 from its recession-era high of 10%.

Low inflation is also helping Americans to keep more of their take-home pay. Consumer prices rose 1.3% in 2016, up from a 0.1% gain in 2015, according to Labor Department data.

The census report pointed to other crosscurrents in income trends and living standards.

The gender pay gap narrowed last year. Women who worked full time year-round earned 80.5% of what men who worked full time all year earned, versus 79.6% in 2015.

While women made up some of their gap, income inequality in the U.S. widened slightly in 2016, according to some metrics. The Gini index, a widely used measure of inequality, was 0.481 in 2016 versus 0.479 in 2015. A score of 0 indicates perfect equality, meaning all households have an equal share of income, while a score of 1 indicates perfect inequality.

Some 22.5% of total income last year belonged to the top 5% and 51.5% went to the top 20% of the income distribution. The bottom 20% took in 3.1% of national income last year. In 2015, the top 5% had 22.1%, the top 20% had 51.1% and the bottom 20% had 3.1%.

The official U.S. poverty rate in 2016 was 12.7%, meaning 40.6 million Americans were living in poverty, the agency said. That was down from 13.5% in 2015. But it is still high relative to earlier periods. It was 11.3% in 2000, ahead of the 2001 recession, and 12.5% in 2007.

A number of states raised their minimum wages over the past two years, boosting compensation for some at the bottom of the pay scale.

Poverty in 2016 was defined as a family of four living on an annual income below $24,563.

The decline in poverty from 2015 was broad-based, though the poverty rate rose for some groups, including people older than 65 and those with a high-school diploma but no college education.

An alternative poverty rate known as the supplemental poverty measure, a more-nuanced metric that accounts for taxes and safety-net benefits, was 13.9% in 2016 versus 14.5% in 2015.

Some 8.8% of Americans lacked health-insurance coverage for all of last year, compared with 9.1% in 2015. Insurance coverage has expanded in recent years as more workers found jobs and provisions of the 2010 Affordable Care Act took effect.

Tuesday's report was based on survey data collected earlier this year for 2016, the final full year of the Obama administration. It excluded some Americans including prisoners, nursing-home residents, some active-duty military personnel and residents of Puerto Rico and other U.S. territories outside the 50 states and the District of Columbia.

The postrecession recovery for incomes has been slower than the rebound in prices for assets such as stocks. The net worth of U.S. households and nonprofits first surpassed its prerecession level in 2012, according to Federal Reserve data not adjusted for inflation.

Household debt also has reached new highs, though it remains below prerecession levels when compared with the size of the overall economy.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

(END) Dow Jones Newswires

September 12, 2017 12:18 ET (16:18 GMT)