Wallets finally catch up with inflation! Americans' purchasing power returns to pre-pandemic levels

According to the latest annual report released by the U.S. Census Bureau, after adjusting for inflation, the median income of American households rebounded to nearly the level of 2019 in 2023, indicating that the purchasing power of Americans has largely recovered. The report also shows that the proportion of the population living in poverty in the United States in 2023 decreased from 11.5% in 2022 to 11.1%. However, the ratio of median income between women and men expanded for the first time in over 20 years in 2023, mainly due to men's income growing faster than women's.

The report points out that the median income of American households in 2023 (adjusted for inflation) increased by 4% to $80,610, up from $77,450 in 2022. This is the first increase since 2019, almost on par with the $81,210 in that year. Liana Fox, Assistant Division Chief of the Census Bureau's Social, Economic, and Housing Statistics Division, stated, "We are back to pre-pandemic peak levels." This data is based on pre-tax income, including social security and other benefit programs, but does not include non-cash benefits such as food stamps and medical subsidies.

These data may become a topic in the presidential election. If the Democratic candidate and current Vice President Harris chooses to emphasize these numbers, she can use them as evidence that the financial situation of Americans has significantly recovered after peaking at 9.1% inflation in 2022. Government data expected to be released at 8:30 p.m. this Wednesday will show that the U.S. CPI inflation rate for July fell from 2.9% to 2.6% in August. The Federal Reserve may start cutting interest rates next week, with its target inflation rate at 2%.

Meanwhile, former President and Republican candidate Trump may counter by claiming that the growth rate of household income in his first three years in office was faster than in the first three years of the Biden-Harris administration, despite a decline in income after the outbreak of the pandemic in 2020.

Although the purchasing power of the typical American household in 2023 has returned to the level of 2019, the standard of living has hardly risen during this period. This contrasts sharply with the situation from 2015 to 2019, where median income (adjusted for inflation) increased by 14%.

The income growth reflects the strong performance of the job market last year, with the unemployment rate dropping to 3.4% in April 2023, the lowest level in half a century. The employment rate for the "prime-age" group of 25 to 54-year-olds averaged 80.7% last year, the highest level in 23 years. Economists typically focus on this age group as it excludes young people still in school and older individuals who are retired or working reduced hours.

By race, the median income of white households increased by 5.4% to $84,630; black households increased by 2.8% to $56,490; while Hispanic households remained stable at $65,540. Asian household income remained largely unchanged at $112,800 Although the overall poverty rate decreased from 2022 to 2023, according to another income measurement standard, the child poverty rate increased from 12.4% to 13.7%. The increase in child poverty is related to the surge in benefits brought about by the expansion of child tax credits two years ago during the pandemic, which expired in 2022. Economist Steven Durlauf stated, "If you want to reduce poverty in the short term, you need to transfer income to poor families."

Furthermore, in 2023, 92% of the U.S. population had health insurance, almost unchanged from the previous year, but the percentage of uninsured children increased by 0.5 percentage points to 5.8%