Has Household Income Peaked for Good?

December 17, 2013

In this week’s Chart of the Week, we track the real median household income in the United States over the last twenty-five years. The movement in this economic variable illustrates how the purchasing power of the typical American household has changed over time. This is an important statistic because it underpins the American ideal that every generation will do better than the previous.

Currently, real household income is sitting near a twenty-year low and has declined every year since 2007. In fact, since peaking in 1999, real household income has decreased in ten of the last thirteen years. Given the importance of consumption to GDP growth — about two-thirds of total GDP growth is driven by consumption — this downward trend in real income for the median household would appear to pose (another) notable headwind to stronger economic growth in the near future and adds to the murky outlook for 2014 GDP expansion.