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An Update to “The Purchasing Power of American Households”

Authors: Eric Van Nostrand, P.D.O. Assistant Secretary for Economic Policy, Laura Feiveson, Deputy Assistant Secretary for Microeconomics, Tara Sinclair, Deputy Assistant Secretary for Macroeconomics

Last week, the Bureau of Labor Statistics reported that median weekly real earnings—that is, the typical American worker’s earnings adjusted for inflation—rose briskly in the fourth quarter of last year: by 1.4 percent, or 5.6 percent at an annual rate.  This robust increase means a further increase in purchasing power for the median worker and is good news for American households. 

We incorporated the new earnings data, along with consumer price data through the fourth quarter, into an update of our December blog post on the purchasing power of American households.  The new data strengthened the argument that income has risen more than prices since before the pandemic: the typical middle-class worker has seen their real weekly earnings rise 2.4 percent since 2019.[1]  We now find that as of the end of 2023, the median American worker could afford the same goods and services as they did in 2019, with an additional $1,400 to spend or save per year.  These results suggest that households are doing even better than our previous estimate of a $1,000 gain in purchasing power, which was based on data through the third quarter of 2023.

Figure 1: Expenditure Share of Median Earnings, Change from 2019:Q4 to 2023:Q4

 Figure 1 shows the change from 2019:Q4 to 2023:Q4 in Expenditure Share of Median Earnings, or the change in the percent of a typical worker’s income that each expenditure category (transportation, food and beverages, other goods and serves, housing, apparel, recreation, education and communication) would have taken up between 2019Q4 and 2023Q4. While the expenditure share for food and beverages and transportation slightly increased, the other categories all decreased. The chart also shows the resulting additional purchasing power for a median worker buying the same consumption bundle; on net, their purchasing power would increase 2.4%.
 

[1] This is based on the Q4 over Q4 growth of non-seasonally adjusted data. The seasonally adjusted percentage change between 2019Q4 and 2023Q4 was 2.5 percent.

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