Median Household Income Down 7.3% Since Start of Recession

The New York Times in its Economix Blog highlighted the fact that February’s median household income was 7.3% lower in inflation adjusted terms than in December 2007, when the most recent recession officially began.   Analysts note that the reason real incomes are lower is because wage gains have not kept pace with inflation.  While inflation is still quite low, income growth has been so anemic that even very little inflation is enough to wipe out whatever gains households are seeing in their paychecks.  Economists differ on why wage gains have been so weak, but many point to global competition, educational slowdown and the innovation plateau.  We follow year-over-year changes in individual’s real average hourly wages closely, as it has been proven to be one of the most useful predictors of the outlook for growth in real consumer spending (two-thirds of the US economy).  The current weakness in real incomes is a warning sign of a possible renewed slowdown in the general  economy and continued weak corporate profits in the future.