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The story of people’s income in America is essentially one where the figure has risen yearly. Periods of recession have been an exception. Since The Great Recession, the increase has been fairly steady, with a setback due to the COVID-19 pandemic. The American Community Survey, part of the Census, has released its median income figures for 2021. Among other things, it shows that median income changes across the states have been uneven. Vermont had the biggest jump from 2019 to 2021 (2020 was omitted because of the effects of the pandemic), with an increase of 8.5% against the national average of .1%.
Median household income is a driver of the overall economy. Married with the cost of living, it is an indication of household purchasing power. And this purchasing power is a critical component of the movement in GDP. Unfortunately, inflation erodes this if income does not keep track with the increase in essential goods and services. This year that is unlikely to happen. According to CPI statistics, inflation has run about 8% over the last six months.
Vermont not only had the highest increase in median household income. It also has the highest number across all states. The national number in 2021 was $69,717. Vermont’s number was $72,431. This is below the state at the top of the list. Maryland’s number was $90,203.
CNBC’s editors pointed out that, in general, the figures were mediocre. “In terms of income growth, 27 states and D.C. either declined or essentially went unchanged since 2019.” This drop brings the conversation back to inflation. With the Fed’s rapid income in interest rates, inflation may last well into next year. Some economists believe it could reach an increase of low double digits. Median income increases can’t catch up.
Among the most expensive assets Americans own is their homes. As mortgage rates reach almost 7%, home values tend to fall become home demand is undermined. Home equity also gets damaged. People become wary about purchases, both large and small.
The news about median household income shows many American households have had an improvement. However, it is not enough to weather inflation’s storm.
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