Posted Wednesday, Sept. 12, 2012, at 10:15 AM
New Census data out today (PDF) shows that median household income fell between 2010 and 2011 in the United States, by an estimated 1.5 percent. That number comes with a +/- 1 percnetage point margin of error at a ninety percent confidence interval, so it's not a huge collapse. But for median household income to still be declining well after the official end of the recession is a very bad sign. It reflects the fact that labor market pain consists not just of unemployment, but also of reduced hours, labor force non-attachment, lower wages, and other income-killers.
These figures also underscore the importance of the various rounds of payroll tax cuts that the Obama administration has enacted. If you look at disposable household income, the picture is quite a bit brighter since the federal government has been using its ability to borrow cheaply to give employed people a nice break on their taxes. Unfortunately, this is set to expire at the end of the year along with a bunch of automatic spending cuts both of which will likely hurt the economy.