I have a tendency to roll my eyes when President Trump brags about the strongest economic recovery in U.S. history before COVID-19 hit. While it was not the strongest economy in terms of Gross Domestic Product growth, it was indeed the best ever based on several other economic metrics, as I will point out in this article.
The US Census Bureau released its annual report for 2019 on household income, poverty and health insurance coverage last week, and it was loaded with good news. Median household income hit a new record high last year; the poverty rate slipped to the lowest level since records have been kept; and the percentage of Americans with some form of healthcare insurance climbed to the highest level ever recorded.
The best news about the Census Bureau report was the fact that the gains and improvements benefited low and middle income families, women, Blacks and Hispanics the most. In a surprise twist, the top 5% of households saw their income drop. We don’t see that very often, but the “income gap” actually narrowed in 2018 and 2019.
The latest report was the best economic news in years and should have made all the headlines, but the mainstream media largely ignored it due to their disdain for President Trump. As usual, I will highlight all of the important details for you today.
Before I get to the findings, it goes without saying that this year’s nationwide Census survey was most challenging due to the COVID-19 crisis. While Census Bureau workers normally collect data by going door to door, canvassing had to be done mostly by telephone starting in early March. Despite that, the Census Bureau is very confident in the data it collected this year.
Household Income, the Poverty Rate & Health Insurance
The Census Bureau released its annual Current Population Survey for 2019 last Tuesday, and it revealed a plethora of strong economic and financial news for American families. The figures I will share below are for 2019, and we are all painfully aware that the coronavirus crisis has slowed economic activity considerably this year; however, it’s still important to know where we were before COVID-19 changed everything.
Perhaps the most impressive number released by the Census Bureau was the unprecedented rise in household income last year. Median household income was $68,703 in 2019, an increase of 6.8% from the 2018 median. That’s an eye-popping increase! Plus, the total number of men and women working in 2019 increased by just over 2.2 million.
The official poverty rate in 2019 was 10.5%, a decrease of 1.3 percentage points from 11.8% in 2018. The 2019 poverty rate of 10.5% is the lowest rate ever observed since estimates were initially published for 1959. This is the fifth consecutive annual decline in the national poverty rate. Since 2014, the poverty rate has fallen 4.3 percentage points, from 14.8% to 10.5%. The number of people in poverty in 2019 was 34.0 million, 4.2 million fewer people than in 2018.
Another piece of good news in the latest Census Bureau report was the significant improvement in women’s earnings. The female-to-male earnings ratio went from 81.7% in 2017 to 82.3% in 2019. That’s the highest ratio in more than 50 years. Here too, the press largely ignored this historic milestone.
Nearly three million women entered the workforce over those three years, hitting an all-time high of 52 million. By comparison, only 2.1 million women joined the workforce in Obama’s last three years in office. Of course, the media didn’t want to acknowledge that fact.
Yet another important data-point the media ignored is the fact that minorities gained more than whites in terms of income. Whites’ median income climbed 6.8% from 2017 to 2019. Yet Blacks saw median incomes rise more than 10%, Asians more than 15% and Hispanics more than 7%.
Finally, the number of Americans who have employer-provided health insurance has exploded since President Trump took office. More than five million people gained employer-based healthcare insurance coverage after Trump took office, 1.2 million in 2019 alone. The number of uninsured climbed, but that’s almost entirely the result of people dropping out of the overpriced ObamaCare individual markets.
Obviously, some of the gains described above have been pared-back by the Covid-19 pandemic and the economic lockdown earlier this year. Yet the trends are what they are, and they will likely continue in the right direction once we get through this crisis. If so, the media will not be able to ignore them indefinitely.
Citigroup’s Useful “Economic Surprise Index” Explained
There are dozens of economic reports released each week, some by government agencies and others by respected private sources, like the big banks and other well-known forecasters. As always, some reports come in above expectations, some below forecasts and some right in-line with the pre-report consensus.
If you follow a lot of economic reports as I do, it’s sometimes hard to identify the overall trend. Are most reports coming in above or below the forecasters’ expectations? That’s why I particularly like the Citigroup (formerly Citibank) “Economic Surprise Index.”
This Index plots the trends in economic reports and lets us see whether the bulk of economic reports are running above or below forecasters’ aggregate expectations. This Index is free to anyone willing to take a couple of minutes or less to Google it on the Internet.
And it’s very easy to understand. Any reading above zero indicates that more economic reports are coming in above forecasters’ expectations. Any reading below zero indicates most economic reports are coming in below the consensus forecast.
How this key Index has performed this year is eye-opening. The Index plunged to a record low during March and April of this year when we went through the economic lockdown. But since then, it has exploded to a new record high, all in just a few months. It’s been some kind of a year we will likely never forget!
The fact that the Index has soared to a new record high since late June should not come as a big surprise, since the economy was expected to stage a strong rebound following the economic shutdown in the spring. However, what remains to be seen is whether the economy will suffer another painful setback as business bankruptcies are widely expected to spike as we approach year-end and early 2021.
As I have written extensively over the last few months, most small and medium-sized businesses were devastated by the economic lockdown earlier this year, and many have struggled since reopening at only 25%-50% of capacity. Many, in fact, have never reopened and have found little success in selling their former businesses. And many more are expected to go out of business in the months just ahead.
The bottom line is there is still a LOT of bad news to come. The only question is, how bad will it be? I think it will be a lot worse than most Americans now expect.
Gary D. Halbert is the president and chairman of Halbert Wealth Management, Inc. His Forecasts & Trends Weekly E-Letter may be obtained free of charge by subscribing at www.halbertwealth.com.