Americans are Right to be Optimistic Regarding Income

Written by Richard Hokenson 

A recent comment in a Bloomberg Close email expressed being perplexed regarding new surveys which reveal that Americans have not been this optimistic about future income since 2001 despite or in spite of the fact that real wage gains have been flat since 2015. The comment thought that this inconsistency occurred because “The survey asked about income, not wages, which could skew results in favour of investors over wage earners.” That interpretation is not correct because the solitary focus on average hourly earnings or average weekly earnings overlooks the following positive developments:

  • Full-time workers dominate employment growth. Since the economic trough of June 2009, the number of full-time workers (persons who work 35 hours or more per week) has increased by 15.832 million while the number of part-time workers (persons who work less than 35 hours per week) has declined by 546,000 (see Chart 1). Someone who works more hours per week has a higher income even if increases in average hourly earnings remain modest.

  • More workers are working year-round. The proportion of full-time employees who work year-round (50 to 52 weeks) reached an all time high of 86 percent (see Chart 2). Nearly 53 percent of part-time employees also work year-round (see Chart 3). The combination of more hours and more weeks is another positive for consumer income.

  • Family income is improving at a faster rate. The focus on wages or average weekly earnings describes individuals. Spending decisions, however, are made by families. There are now more adults in the same family. The number of families with at least one unemployed member fell by 557,000 which is nearly double the decline recorded in the prior year (see Chart 4). There are consumer outlays which are dependent on the number of persons in a family, e.g. food, but they are overshadowed by significant expenses that depend principally on the total family not individuals, e.g. housing. While more adults at home is a headwind for household formations, it is a major positive for income.



This update was researched and written by Richard Hokenson, as of September 12 2018