Even for an economist, Larry Mishel is famously grumpy. “I’m a glass-half-empty guy,” he told me. He is the president of the Economic Policy Institute, a progressive think tank devoted to analyzing and improving the economic lives of poor, working, and middle-class Americans. Which is to say, in his hundreds of academic papers, blog posts, interviews, “I haven’t written anything about the U.S. economy this positive in many years. Probably since the late nineties. That was the last time there was really good, across-the-board income and wage growth.” Until today. At 11:03 this morning, shortly after the Census Bureau released its annual report on household income in the U.S., he tweeted , “I can’t remember feeling such glee on seeing a new economics data report.” He then spent forty-three minutes reading more details of the data and tweeted, at 11:46 A.M., “I’m especially thrilled at the fast growth at the bottom. WOW,” and linked to a chart showing that the poorest ten per cent of Americans had experienced the most growth, seeing their cumulative earnings rise by 7.9 per cent in 2015. Nearly one million fewer Americans were reported as living under the poverty threshold. There was a steady flow of happy tweets throughout the day, filled with words Mishel isn’t used to typing, like “superb” and “great.”
Economists will be unpacking today’s Census report for days and will likely be discussing it in decades. It is a marvel. Americans at nearly every income level, in nearly every part of the country, saw their incomes rise an average of 5.2 per cent, to a median of $56,500 —a huge nationwide increase for a one-year period and the first time since 2007 that average household income rose at all. Often, in reports such as these, one group’s gains can appear to have come at the cost of others. But that is not the case this time. The rich got richer; the poor got richer faster; and the middle did quite well, too. The Census tracks Non-Hispanic White, Black, and Hispanic households, all of which made considerably more in 2015 than in 2014, with Hispanic families seeing the greatest increase. Young people and older people, women and men, immigrants and native-born all saw their incomes rise in something like lockstep.
The number of people gaining new jobs has been rising, and the unemployment rate has been falling—slowly, steadily, and unspectacularly—since 2010. Yet average household income has stayed stubbornly flat or has fallen every year since 2008. It was a bit of a puzzle. How could more people be working, yet the average family was making less money? Dean Baker, of the Center for Economic and Policy Research, explained that, when unemployment remains at more than about six per cent, there are so many desperate people looking for work that employers are not forced to pay their workers more. They can just fire them and hire someone else for less. But, last year, unemployment fell to much less than six per cent, and employers had no choice but to pay higher wages. That’s why this reported increase was both a sudden leap upward and the result of several long-term, slow-moving trends.
Dale Jorgenson, a professor of economics at Harvard and a Nobel Prize winner, told me that the new numbers suggest that, after years of struggling to climb from the pit of the Great Recession, “we’re almost out of it.” Even if no single government move gets the credit for the huge gains in this report, it is now much harder to credibly argue that the Obama Administration has failed the American people economically, so today’s report is likely to be positive news, in a rough week, for the Clinton campaign. However, it is unlikely to convince at least some Trump supporters. Trump outpolls Clinton by double digits in rural areas . As Timothy B. Lee, of Vox, has shown , families in rural areas were one of the few demographic groups that saw their income decline between 2014 and 2015. Nearly all the gains came in cities. Looking just at major urban areas, the increase in income was a truly stunning 7.3 per cent.
The key question now is whether this is a one-time blip, a short-term correction after a particularly grim few years, or if it is a sign that the economy has made a more fundamental change. Nathaniel Hendren, an economist at Harvard, was quite surprised by this report. His work over the past few years, looking at the unequal distribution of economic opportunity in America, had prepared him to believe that we would never see such a remarkable improvement. He spent much of the day wondering if he has been too pessimistic, if, perhaps, the loss of middle-class jobs and the deepening of poverty are not “quite as bleak as I had thought.” Of course, being an economist, he says we need more data to make that judgment. Erik Hurst, an economist at the University of Chicago Booth School of Business, gently scoffed at the idea that this report means that we can forget about the deep issues of rising inequality, a shattered middle-class, and profound inequity in opportunity.
Larry Mishel said that he can easily spin this report into a glass-half-empty story. He points out that average household incomes are still less than they were in 2007, after adjusting for inflation. And, in 2007, average household income was less than what it had been in 1999. So another way of looking at the report is that household income in 2015 was almost exactly the same as it was in 1998.
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