US Economy and Economic Indicators

US Economy and Economic Indicators

This week new research was released on the current makeup of the US middle class, the continuing commodities price slump, other — more general — US eco- nomic indicators provide a somewhat less murky, if still muted, projection of the health of the US economy over the next year or two.

Pew Research Center Analysis of Current US Middle Class

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After more than four decades of serving as the nation’s economic majority, the American middle class is now matched in number by those in the economic tiers above and below it. In early 2015, 120.8 million adults were in middle-income households, compared with 121.3 million in lower- and upper-income households combined, a demographic shift that could signal a tipping point, according to a new Pew Research Center analysis of government data.1

In at least one sense, the shift represents economic progress: While the share of US adults living in both upper- and lower- income households rose alongside the declining share in the middle from 1971 to 2015, the share in the upper-income tier grew more.

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Over the same period, however, the nation’s aggregate household income has substantially shifted from middle-income to upper-income households, driven by the growing size of the upper-income tier and more rapid gains in income at the top. Fully 49 per cent of US aggregate income went to upper-income households in 2014, up from 29 per cent in 1970. The share accruing to middle-income households was 43 per cent in 2014, down substantially from 62 per cent in 1970.2

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And middle-income Americans have fallen further behind financially in the new century. In 2014, the median in- come of these households was 4 per cent less than in 2000. Moreover, because of the housing market crisis and the Great Recession of 2007-09, their median wealth (assets minus debts) fell by 28% from 2001 to 2013.

Meanwhile, the far edges of the income spectrum have shown the most growth. In 2015, 20 per cent of American adults were in the lowest-income tier, up from 16 per cent in 1971. On the opposite side, 9 per cent are in the highest-income tier, more than double the 4 per cent share in 1971. At the same time, the shares of adults in the lower-middle or upper-middle income tiers were nearly unchanged.

“Middle- income” Americans are defined as adults whose annual household income is two-thirds to double the national median, about US$42,000 to US$126,000 annually in 2014 dollars for a household of three. Under this definition, the middle class made up 50 per cent of the U.S. adult population in 2015, down from 61 per cent in 1971.

1 The difference between the two population estimates is not statistically significant.

2 The key data source for the report is the Current Population Survey, Annual Social and Economic Supplement for 1971 to 2015. In the survey, respondents provide household income data for the previous calendar year. Thus, income data in the report refer to the 1970-2014 period and the demographic data from the same survey refer to the 1971-2015 period.

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