Median incomes are up and poverty rate is down, surprisingly strong census figures show

Reporting from Washington —  The economic recovery is finally providing relief to America’s long-running problem of stagnant middle-class incomes.

The Census Bureau’s unexpectedly-rosy annual report on poverty and incomes, released Tuesday, showed the biggest improvement in decades on both fronts.

Healthy job growth, coupled with moderate wage gains, lifted the median household income to $56,500 last year, up 5.2%, or $2,800, from 2014. It was the sharpest annual increase on record.

The nation’s poverty rate fell to 13.5% in 2015 from 14.8% the year earlier, the largest single-year percentage drop since 1968.

American families still have some distance to go to make up for many years of stagnating earnings and rising poverty, but the strong and broad-based improvement indicates that the recovery from the Great Recession has taken hold and that American households may have more cause for optimism than is generally perceived.

Read the census report »

“The good news is, maybe we’ve turned the corner,” said Sheldon Danziger, president of the Russell Sage Foundation, who, like other experts following poverty and income issues, had expected some improvement, but nothing this large. “I’m certainly more optimistic than I’ve been in a long time.”

The Census Bureau report, which also showed further improvements in health insurance coverage of Americans, was hailed by President Obama and could provide a boost to Democratic presidential nominee Hillary Clinton, whose fortunes are closely linked with that of the president’s. Political scientists have found that when personal incomes rise during an election year, the party in the White House typically benefits.

Obama, stumping for Clinton at a campaign event Tuesday in Philadelphia, did not pass up the moment to spotlight the census report. Obama said the uninsured rate was the lowest on record as was the pay gap between men and women.

“So, now, let’s face it; the Republicans don’t like to hear good news right now,” Obama said. “But it’s important just to understand this is a big deal. More Americans are working, more have health insurance, incomes are rising, poverty is falling, and gas is $2 a gallon. … Thanks, Obama!”

The median income growth was fueled by sharper gains in poorer families. Households at the bottom 10% of the economic ladder saw a 7.8% increase in income last year, while the top 10% in income had a 2.9% gain. But the report also found income inequality remains near a record high.

Tuesday’s report offered a far brighter picture than the one being painted by GOP candidate Donald Trump, who has focused on job loss and wage stagnation among displaced blue-collar and manufacturing workers. Peter Navarro, a Trump economic advisor, did not respond to requests for comment on Tuesday.

Census figures confirmed, however, that much of the economic growth in 2015 was concentrated in large cities, not the rural areas where most of Trump’s support is located. It was also highest in the West and lowest in the South.

Since Democrats and Republicans traditionally have perceived the nation’s economic performance differently, the gap between income growth in cities and the rest of the country could widen that divide.

Reed Galen, a longtime GOP strategist, agreed that “any moderate increase in President Obama’s popularity accrues to Hillary Clinton’s electoral chances in November.”

But he doubted that that new census figures would substantially ease the frustration many Americans still feel, noting that the economy has yet to return to the “halcyon days” before 2008.

“We have not been there and are not likely to get there any time soon,” Galen said. “If the Census is doing its survey and showing the poverty rates are down and median wages are up, why are so many people ticked off?”

One explanation is that even with the strong gains last year, median household income remains 1.6% lower than it was in 2007, the year before the recession took hold, and 2.4% lower than the peak median income in 1999, when it hit $57,909.

Poverty levels likewise remain higher than the 12.5% reported in 2007.

“Over the long term, it’s not a great story,” said Harry Holzer, a public policy professor at Georgetown University and former Clinton administration chief economist at the Labor Department. “The story is about wage stagnation over the long term. The story is about people dropping out of the labor force. Those are real and very concerning, but maybe now we’re seeing a bit more recovery from the recession than we had thought.”

Holzer noted that while worker wage gains have been modest in the recovery, increasing only about 2% last year, inflation was well below that, meaning workers were seeing small, but nonetheless real, increases.

At the same time, more people are finding jobs. Last year, 1.4 million more men and about 1 million more women were working full time year-round than in 2014, the census found. In addition, workers in some 20 states saw higher minimum wages take effect.

In sheer numbers, the number of poor adults and children in America declined to 43.1 million last year, down from a peak of 46.7 million 2014. The nation’s poverty rate had reached a two-decade high of 15.1% in 2010, a year after the Great Recession ended.

The poverty rate for children, or those under 18, stood at 19.7% last year. That was down from 21.1% in 2014.

The Census Bureau records children and adults as poor if they are living in households below the poverty line, which was about $24,000 for a family of four. The bureau’s poverty measure does not count non-cash incomes such as food-stamp benefits and tax credits.

The bureau also reported Tuesday that the number of people in the United States without health insurance fell further last year to 9.1% from 10.4% in 2014. The drop was expected, thanks mostly to the Affordable Care Act, also known as Obamacare, which saw its second full year of impact in 2015.

With many more Americans signing up for private insurance through new marketplaces created by Obamacare, the number of people who were uninsured for part or all of last year came down to 29 million, from 33 million without medical coverage in 2014.

Apart from the urban-rural divide, the improvement in income and poverty measures last year was spread across geography, age and race. And the gains are likely to continue in the near term, as the low unemployment rate — 4.9% in August — and tightening labor market pushes up wages and pulls more people into the workforce.

Longer range, however, the prospects for income gains are clouded by the nation’s slow economic growth and low productivity gains. And challenges remain for many households that lost work in manufacturing and other jobs paying middle-class wages.

“I would expect at least another year or two of very healthy increases, and then maybe things will moderate some,” Holzer said of household incomes. “But you’ll have some momentum into 2016 and beyond. Then you will see some flattening. And the question is, when the flattening occurs, where will we be? That will be the real question.”

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UPDATES:

3:10 p.m.: The article was updated with more reaction and analysis.

8:35 a.m.: This article was updated with additional reaction.

This article was originally published at 8:05 a.m.