Today we present a guest post written by Matías Scaglione and Romina Soria, co-founders of the data science and economic consulting firm Motio Research.
In May 2024, we presented our prediction for the 2023 Census nominal and real household income data, using estimates derived from CPS microdata as predictors. The prediction used the March values from Motio’s nominal, non-seasonally adjusted series as the best approximation of the Census’s previous calendar year values (further rationale can be found in the referenced blog post and in the post introducing the series). The strong correlation between the March nominal values and the Census nominal values is clearly visible in Figure 1.
Following our guiding principles of simplicity and clarity, we ran a simple regression to predict the 2023 Census nominal household income estimate, using Motio’s series as the sole predictor. This exercise yielded an expected nominal increase of 6.7% in U.S. household income for 2023, rising from $74,580 to $79,547. Adjusted for inflation using the Chained Consumer Price Index, we predicted a real increase of 2.6%, from $77,510 to $79,547. As noted in a blog post back in May, the anticipated increase “would be the first increase in U.S. real median household income after three consecutive declines from 2020 to 2022.” Figure 2 below shows the predicted versus actual 2023 Census estimates in historical context.
The Census Bureau released the 2023 Median Household Income estimates on September 10, 2024. The report confirmed our prediction of a recovery after three consecutive years of decline: “This is the first statistically significant annual increase in real median household income since 2019.” Although the magnitude of the recovery was higher than anticipated, with a nominal increase of 8.1% (vs. our predicted 6.7%) and a real increase of 4.0% (vs. our predicted 2.6%), the Census estimates fell within our predicted range. Additionally, the recovery in household income signifies a return to pre-Covid maximum values, which our public index had already indicated in the March 2024 estimate (see Figure 3).
The release of the 2023 Census annual estimates reaffirmed the historically strong association between the Motio and Census household income series, further validating the reliability of Motio’s monthly estimates. This demonstrates that the Motio median household income series stands on its own, offering a timely key metric of U.S. national economic well-being every month.
This post written by Matías Scaglione and Romina Soria.
