Median U.S. Household Income Slows As U.S. Job Openings Cool
Median income was $63,179, essentially flat from a year earlier after three years of increases. Median U.S. Household Income Slows As U.S. Job Openings Cool (#GotBitcoin?)
American incomes remained essentially flat in 2018 after three straight years of growth, according to Census Bureau figures released Tuesday that offer a broad look at U.S. households’ financial well-being.
Median household income was $63,179 in 2018, not statistically different from the 2017 median based on figures adjusted for inflation. The poverty rate in 2018 was 11.8%, a decrease of a half percentage point from 2017, marking the fourth consecutive annual decline in the national poverty rate. It was the first time the official poverty rate fell significantly below its level at the start of the recession in 2007.
The share of Americans who lack health insurance rose for the first time in about a decade, according to the figures. In 2018, 8.5% of people, or 27.5 million, didn’t have health insurance at any point during the year, compared with 7.9% of people, or 25.6 million, the previous year. That reversal comes years after the 2010 Affordable Care Act expanded insurance coverage to millions of Americans.
The figures will be closely watched for new insights into how the economy fared in 2018. In recent weeks, the government has revised downward its estimates for job gains, economic output and corporate profits at various points in time since early last year. Previous government surveys had suggested income growth picked up last year, though the census figures are considered more reliable because of the quality and scope of the data.
Income growth over the past decade hasn’t been as strong as some economists have expected given that the 10-year economic expansion has created one of the tightest labor markets in recent history. The unemployment rate hovered at or below 4% last year.
Part of the reason is employers have become more adept at holding down wages by using technology, and consolidation in industries such as telecommunications and banking also has damped income growth, said Carl Tannenbaum, chief economist for Northern Trust. The share of workers who are in unions, which push for worker pay raises, also continues to decline steadily.
U.S. Job Openings Cool In Slowing Labor Market
A pullback in openings aligns with other labor-market signals pointing to a slowdown.
The number of job openings decreased in July from a year earlier for the second consecutive month, underscoring slowing demand for new workers, though opportunities remain plentiful for job seekers.
Job postings fell 3% from a year earlier in July to 7.217 million after declining 2% in June, the Labor Department reported Tuesday. Before June, job openings hadn’t decreased year over year since early 2017.
“If this downturn is a longer trend it could be quite worrying,” said Julia Pollak, labor economist at employment site ZipRecruiter. “It shows that demand for labor is falling.”
Openings peaked at 7.6 million in November and have decreased by about 400,000 since then.
Still, the number of available jobs remains high. Job openings exceeded the number of unemployed Americans by 1.2 million in July, the 17th straight month openings have outnumbered job seekers.
Employees are taking note: The rate at which workers quit their jobs ticked up to 2.4% in July after holding steady at 2.3% for 13 straight months, a sign of worker confidence in the job market.
More Americans leaving their jobs also bodes well for wage growth, as workers gain bargaining power when they move from one job to another. Year-over-year growth in average hourly earnings has been above 3% for more than a year after lagging for much of the economic expansion.
As long as openings exceed available workers, employees hold a fair amount of leverage, said Nick Bunker, Indeed Hiring Lab economist.
“If we do continue to see a significant slowdown in employer demand, we’re going to be less likely to see these pickups in job hopping,” he said.
“In the future, such an increase might be even less frequent if employer demand continues to stagnate. The labor market remains strong, but signs point to it slowing to where job seekers may lose out on some opportunities,” said Nick Bunker, Indeed Hiring Lab economist, in a note.
A pullback in openings aligns with other labor-market signals pointing to a slowdown, such as hiring. The U.S. economy added an average of 156,000 new jobs a month over the past three. That was down from average growth of 190,000 a month for the eight years since employment started picking up after the last recession.
The unemployment rate, at 3.7%, is historically low, but little changed from 3.8% a year earlier. Between 2010 and 2018, by contrast, it fell on average 0.6 percentage point a year.
U.S. Job Openings Edged Lower
Number of openings in September exceeded the number of unemployed Americans by 1.26 million.
Jobs remain plentiful and hiring solid—showing that while the labor market has cooled, it remains a source of strength for the U.S. economy.
The number of unfilled jobs declined to a seasonally adjusted 7.02 million at the end of September, the Labor Department said Tuesday. That was the fewest available jobs in 18 months. But openings still exceeded the number of unemployed Americans—those without work but actively looking—by 1.26 million. Before 2018, openings had never exceeded unemployment in records back to 2000.
“The labor market remains strong, but is clearly slowing down,” said Nick Bunker, an economist at job-search site Indeed.com.
Openings, down from 7.39 million a year earlier, have generally declined this year. But hiring held fairly steady in recent months. For September, 5.93 million Americans were hired, up from 5.67 million a year earlier. The result is the number of unemployed Americans has also edged lower.
In September, the unemployment rate fell to 3.5%, the lowest reading in 50 years, while the rate in October ticked up to 3.6%. The increase in part reflected that a strong labor market and better wages were drawing some potential workers off the sidelines.
The rate at which workers quit their jobs, viewed as a proxy for confidence in the labor market, edged down to 2.3% in September from 2.4%, Tuesday’s report showed. The August and September quits rate was the highest recorded since 2001.
The solid labor market is supporting consumer spending and the broader U.S. economy.
The Institute for Supply Management said Tuesday that activity in the U.S. service sector grew at a faster pace last month. The ISM’s nonmanufacturing index was 54.7 in October versus 52.6 the prior month. A reading above 50 indicates an expansion in activity, while a reading below 50 indicates a contraction.
The employment index increased to 53.7 from the September reading of 50.4. Anthony Nieves, head of the ISM survey, said services-sector employment “looks good right now,” which is important because “where employment goes, the sector goes” in the labor-intensive sector.
Consumer Spending Rose In August, But Incomes Pose Hurdle For U.S. Recovery
Commerce Department report shows personal income fell 2.7% due to a drop in unemployment benefits.
A drop in household income and persistently high layoffs are threatening to further slow the U.S. economic recovery, which already appears to be losing momentum as the pandemic continues.
Personal income—what households received from salaries, investments and government aid—fell 2.7% in August as enhanced unemployment checks shrank, the Commerce Department said Thursday. Meanwhile, another 837,000 workers filed for unemployment compensation last week after being recently laid off, the Labor Department said. In total, nearly 12 million workers are receiving unemployment compensation through regular state programs.
The level of weekly jobless claims shows layoffs remain persistent in some industries, and more companies announced cuts this week. American Airlines Group Inc. and United Airlines Holdings Inc. told employees they will go forward with more than 32,000 job cuts Thursday, after lawmakers were unable to agree on a broad coronavirus-relief package.
Insurer Allstate Corp. on Wednesday said it planned to lay off 3,800 employees. Walt Disney Co. on Wednesday announced permanent layoffs for 28,000 theme-park workers who were previously on temporary furlough.
The economy up to now has rebounded more quickly than many economists thought. But with federal aid fading and job growth slowing, consumer spending—the key driver of economic activity in the U.S.—could weaken. Economists believe the recovery is entering into a modest and more grinding phase.
“There’s clear evidence that growth is decelerating,” said Michael Gapen, chief U.S. economist at Barclays. He said, however, that the risk of a double-dip recession is low, in large part because households have built up their savings during the pandemic. “There’s still quite a bit of saving and liquidity out there. It’s likely to support spending for another few months.”
Despite the drop in August, household income was 2% above its level in February, the month before the pandemic hit the U.S. Income has been boosted by one-time federal stimulus checks, stock-market gains, and enhanced unemployment insurance payments. Meanwhile, lawmakers and the White House remain at odds on a new round of coronavirus aid, including additional aid for laid-off workers.
Consumers increased spending over the summer, as they made up for purchases they put off during the spring and bought goods such as bicycles, cars, groceries and home improvements. But the August boost to spending of 1% was far smaller than earlier in the summer when spending grew 9% in May, 7% in June and 2% in July. Spending on services—such as restaurant outings, hotels, and air travel—remains depressed.
The labor market’s recovery also is showing signs of slowing down since the summer. Employers through August have generated about 11 million jobs, or about half of the 22 million lost at the start of the pandemic, with the bulk of the gains coming in May through July.
Economists surveyed by The Wall Street Journal project September’s jobs report, to be released Friday, will show a gain of 800,000 jobs and an 8.2% unemployment rate, down slightly from 8.4% in the prior month.
Still, economic readings suggest the economy rebounded quickly in the third quarter that ended Wednesday after contracting sharply in the second quarter.
Strong consumer spending helped propel the economy in the third quarter that ended Wednesday. Economists estimate U.S. gross domestic product—the broadest measures of goods and services—grew at an annual rate of 30% or more in July through September.
That would restore a big chunk of output lost in the spring when the coronavirus outbreak prompted businesses to shut down. Output fell at a 31% pace in the second quarter after a 5% drop in the first, the Commerce Department said this week, the sharpest quarterly contraction in the post-World War II era.
The economy is still digging out of a big hole. Few economists expect the third quarter’s robust growth to persist, in large part because Americans’ ability and willingness to spend may not hold up. Forecasting firm IHS Markit projects growth in U.S. output to slow to a 2.5% annual rate in the fourth quarter.
Spending has been supported by strong job growth after pandemic-related closures ended and federal assistance to households.
The path ahead for the economy is uncertain. First, it isn’t known how much employers can expand or cut back on layoffs in the absence of a coronavirus vaccine. Second, the effects of federal aid to households are fading. Many households got up to $1,200 in one-time payments under the Cares Act, along with an enhanced weekly unemployment benefit that shrank in August and is set to expire this month.
From late March through July, unemployed Americans received $600 a week—or $2,400 a month—on top of their normal jobless benefits, under federal stimulus in the Cares Act. Under an executive action by President Trump, unemployed workers received an additional $300 a week for no more than six weeks starting in the week ended Aug. 1.
If consumers cut spending in response to the reduction in their income, businesses from restaurants to bike repair shops to doctors could take a hit on sales, denting economic growth.
Also, much of the spending in the summer may have reflected “pent-up demand”—purchases that households had put off in the spring. This includes visits to the dentist, home repairs and clothing purchases. Now that many households are caught up on those purchases, spending may revert to more-normal levels this winter.
Hannah Purdy, a 28-year-old from Boise, Idaho, and her husband cut spending in the spring out of fear of losing their jobs at a hospital, where she is a revenue-cycle analyst and he is a mechanical engineer. When that didn’t happen, they started increasing their spending this summer. They remodeled their basement and, last month, installed hardwood flooring.
Now, they say, their spending habits have reverted to normal.
“We are both feeling a little bit better about the economy,” she said. “I don’t necessarily feel better about the pandemic but I feel better about our ability to figure out how to operate effectively around the realm of a pandemic.”
Their disposable income has actually increased this year. After the Federal Reserve cut interest rates, the couple refinanced their mortgage at a lower rate, saving them $300 a month. On top of that, they say, real estate websites indicate that their home has increased in value, so they are feeling wealthier.
This fall, she plans to take her first trip since March—to Tennessee to visit her parents. She said that overall, though, they remain cautious and are pocketing much of their income rather than spending it.
One positive sign: Households have gained confidence in the recovery. The Conference Board, a private research group, said this week its index of consumer confidence surged in September to the highest level since March. Higher confidence makes it more likely that consumers will spend rather than save—and boost the overall economy.
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