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The Six-Month Recovery

For the typical American, the economic rebound ended in May 2012

On the eve of the sequester, there's more bad news about the economy. Just last month, Berkeley economist Emmanuel Saez reported that during the first two years of the recovery (2009-2011) average market income for the top one percent in the income distribution grew by 11.2 percent while it shrank by 0.4 percent for everyone else. Saez didn't yet have distribution data for 2012 (and likely won't for many months). But he predicted that surging stock prices and re-timing of income to avoid the 2013 tax increases probably meant we'd likely see much bigger gains for the one percent in 2012, while the bottom 99 percent would likely have experienced some gains, too—albeit much more modest ones.

That may still prove true. But new data from two former Census officials at Sentier Research, a private firm, indicates that median income, which had finally started sustaining consistent increases in early 2012 after dropping through the first two years of the recovery, halted its upward climb in May. (It is now $51,584.) Since May, there’s been no statistically significant increase in median income. For the typical American worker, then, recovery from the 2007-2009 recession began in the fall of 2011 and was over that following spring. Hope you liked it!

This is market data, and doesn't include government redistribution through taxes and benefits. When those are factored in, we may have seen a modest increase in median income after May 2012. That is reason to be thankful for such policies as the earned income tax credit, the payroll-tax cut (now expired), the extension of unemployment benefits, etc. But when most people think of "the economy" they aren't thinking about the government's social safety net; they're thinking about wages. And Sentier's data suggests that the economy gave the typical worker only six months of post-recession stimulus before throwing in the towel. More authoritative data from the Census bureau will eventually follow, but will likely show the same pattern.

Median income in January 2013 is 1.7 percent higher than it was in January 2012, thanks to the increases in the first four months of 2012. That is a modest increase. But it's still 4.5 percent lower than it was in June 2009, the start of the "recovery," and 6.2 percent lower than it was in December 2007, when the recession began. And if the pattern since May 2012 continues into 2013, we won't see any improvement soon. Look, I know the struggles of ordinary workers to pay their bills pale in comparison to the (entirely hypothetical) threat that the budget deficit poses to the U.S. bond market. But would it be too much to ask Congress to pass—or even sweeten—the president's proposal to increase the minimum wage