U.S. Incomes Decline for Third Consecutive Year
Americans are facing the challenge of declining incomes for the third year in a row, primarily attributed to surging inflation. Median household incomes have dipped to $74,580 in 2022, marking a 2.3 percent decrease from the 2021 estimate of $76,330. This decline represents a 4.7 percent drop since incomes peaked in 2019.
The Economic Landscape
The Census Bureau’s latest report underscores the ongoing economic struggles faced by American households, which have persisted since the onset of the Covid-19 pandemic. These challenges were exacerbated by a four-decade high in inflation, driven by supply chain disruptions and energy price spikes due to the Ukraine conflict in the summer of 2022.
Hope on the Horizon
Despite these difficulties, there is optimism for the future. Experts predict that the economic landscape may begin to shift in the coming year. Earnings and inflation trends show signs of improvement, thanks to a robust labor market and stabilizing price increases. Chief Economist at Comerica Bank, Bill Adams, believes that wages may start to recover some of the lost ground in the previous years.
Wage growth for the typical worker began to outpace inflation in December 2022, with inflation-adjusted wages increasing by approximately 3 percent in July. This increase in household incomes is attributed to more individuals re-entering the job market, contributing to solid economic growth despite the Federal Reserve’s efforts to combat rising inflation through increased interest rates.
The Census Bureau’s annual report reveals regional disparities in median household incomes in 2022. The highest incomes were observed in the West (approximately $82,900) and the Northeast (around $80,400), followed by the Midwest (about $73,100) and the South (about $68,200). However, the official U.S. national poverty rate remained at 11.5 percent in 2022, affecting around 37.9 million individuals living in poverty. This measure does not account for taxes paid by households or noncash government assistance.
Earnings and Gender Gap
Median earnings in 2022 for all workers, adjusted for inflation, experienced a decline of approximately 2.2 percent, reaching about $48,000 compared to the previous year. Among full-time, year-round workers, median earnings dropped by 1.3 percent to about $60,100. Notably, the gender pay gap among full-time, year-round workers remained relatively stable, with a female-to-male earnings ratio of 84 percent in 2022.
Disparities Across Cities
Recent reports highlight significant disparities in income growth among U.S. cities from 2019 to 2021. Median incomes in San Bernardino, California, surged by 31.3 percent to $65,311, while Baton Rouge, Louisiana, saw incomes drop by 9.6 percent to $45,819. A study tracking these changes reveals how some areas experienced substantial growth, while others faced decline. Huntsville, Alabama, followed closely behind San Bernardino with incomes growing by 30.21 percent.
Even affluent cities like New York City and San Francisco were not immune to income declines. Moreno Valley, California (21.99 percent), Winston-Salem, North Carolina (21.65 percent), and Toledo, Ohio (20.27 percent) complete the top five cities with income growth. Baton Rouge experienced the largest decline in median incomes.
As the economic landscape continues to evolve, these trends underscore the challenges and disparities within the United States’ income landscape, as well as the potential for recovery and improvement in the years ahead.