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U.S. President Barack Obama waves as he arrives aboard Air Force One at O'Hare International Airport in Chicago, Illinois, U.S. October 7, 2016. REUTERS/Jonathan Ernst - RTSR9MC
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The Obama expansion: Just in time for 2016

The tough economic times of the last decade have shaped the 2016 elections so profoundly that most Americans are accustomed to seeing the world through a lens clouded by their experience of stagnant incomes. That makes it harder to recognize when conditions have changed. And yet times do appear to be different: American businesses have created almost 9.2 million net new jobs since January 2013, recalling the job creation rates of the 1980s and 1990s and the latest Census Bureau data show that over the three years from 2013 through 2015, the incomes of most American households grew, and at rates that matched or even exceeded the 1980s and 1990s.

Last month, the Census Bureau reported that the aggregate median income for all U.S. households grew 5.2 percent in 2015, the first such increase since 2007. But aggregate median income data can be misleading, which is why I apply a statistical approach that digs much deeper into the data. This approach allows us to capture the income experience of typical households of various age cohorts, by tracking their incomes as they age.

To see if and when economic conditions did truly change, we started by tracking the income path of Millennial households, headed by people ages 25-to-29 in 2009, from 2009 to 2015. We also tracked the income path of Generation X households, headed by those ages 35-to-39 in 2009, over the same years, and the income path of late Boomer households headed by those ages 45-to-49 in 2009 over those years.

This analysis found, as expected, that times were tough for most Americans from 2009 through 2012. For example, the median income of the Gen X households was flat over those years, and the late Boomer households absorbed income losses averaging 1.1 percent per year. The only households with rising incomes from 2009 to 2012 were the Millennials, and their gains were a fraction of those achieved by households of comparable ages in the 1980s and 1990s (Table 1, below).

Our analysis also showed that most people’s income paths shifted starting in 2013. Compared to the preceding three years, the income gains by the Gen X households went from zero to 2.9 percent per year; and the late Boomer households, whose median income fell 1.1 percent per year from 2009 to 2012, saw gains of 1.4 percent per year from 2013 through 2015. Finally, the median income of the Millennial households jumped from 2.7 percent per year to 4.6 percent per year. Also, it’s worth noting that the largest income gains for all three age cohorts came in 2015.

gs_20161012_table-1-avg-annual-gains

This analysis also shows that finally, most Americans are better off than when President Obama took office. The median income of Millennial households, in 2015 dollars, rose from $50,875 in 2009 to $63,010 in 2015, as they aged from 25-to-29 years old to 30-to-35. Similarly, the median income of Generation X household ages 35-to-39 in 2009 grew from $66,287 in 2009 to $72,028 in 2015. Even the Late Boomers ages 45-to-49 in 2009 managed small gains, edging up from $70,706 in 2009 to $71,300 in 2015.

We can also compare this record with that of other recent presidents, using an analysis published by the Brookings Institution last year. In that report, I tracked the income progress by comparable age cohorts during the presidencies of Ronald Reagan, George H.W. Bush, Bill Clinton, and George W. Bush—that is, gains in median income by households headed by people ages 25-to-29, 35-to-39, and 45-to-49 in the first year of each of those presidents’ terms. Since no president should be held responsible for the economy’s performance in his first year in office, we tracked the income gains of each age cohort from year two of each presidency through year one of his successor’s term.

Using this framework, it’s clear that most American households made more income progress under Obama than households of comparable ages under George W. Bush or his father, George H.W. Bush (Table 2, below). Moreover, the income gains of 2013 through 2015, like the job growth of the same years, suggest that the U.S. economy is still capable of producing a robust expansion, at least for a few years. The data in Table 2 below show that incomes grew at a faster annual rate over the last three years than they did on average over the eight years of Reagan’s presidency for all three age cohorts, and faster than they did on average over the eight years of Clinton presidency for two of the three age cohorts.

Administration Ages 25–29 Ages 35–39 Ages 45–49 Reagan (1982–1989) 4.0% 2.8% 0.3% Bush 1 (1990–1993) 1.4% 0.7% -1.4% Clinton (1994–2001) 5.3% 2.5% -0.1% Bush 2 (2002–2009) 1.9% 0.3% -1.2% Obama (2010–2015) 3.6% 1.4% 0.1% Obama (2013–2015) 4.6% 2.9% 1.4%

Of course, it’s not truly a fair comparison politically, since Clinton and Reagan delivered strong income gains over their entire terms, while Obama has done so for only three years. But especially after the meager income progress of the 2002–2007 expansion, the data show that the U.S. economy can still deliver robust income growth for almost everyone.

All of this is good news for Hillary Clinton who is facing the so-called third term curse. As the political scientist Alan Abramowitz notes in his “Time For Change” model, political parties have a very hard time holding onto the presidency for three terms in a row. Setting aside the antics of the Trump campaign, real income gains should give her a boost in November.

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