The highest average income in US levels in 2019 before coronavirus changed everything. According to a 2019 government survey released by the US Census Bureau yesterday, U.S. average household income was at its highest levels in 2019, while poverty levels fell. Assistant division chief Trudi Renwick of the U.S. Census Bureau noted the increase in income. He said, “We do see in the data that we have an increase in employment, that we have an increase in earnings, and those would all tend to push median household income up.” Adjusted for inflation, this means that US 2019 average incomes are the highest since 1967.
Median Household Income by Year
Data from the U.S. Census Bureau, real median household income jumped 6.8% from $64,324 in 2018 to $68,703 last year. This is the highest median income recorded since 1967, the year when the agency started recording data. The poverty rate went down to 10.5%, a drop of 1.3 percentage points from the year before. More important, it was the fifth consecutive annual decline in poverty rates. It also stands as the lowest rate recorded since 1959, when the agency started tracking.
David Deull, principal economist at IHS Markit said “It was a pretty banner year for households, and really across the income distribution, we got a lot of eye-popping figures in this release.” He described 2019 as the “late-stage expansion high watermark benchmark.”
The report also has its concerns. The number of people without health insurance also hit increased levels. The agency also said that uninsured Americans rose 0.3 percentage points to 9.2%. From 28.6 million, those without insurance rose to 29.6 million, including more children.
The data helped show the employment picture. More people availed employer-provided coverage in 2019 compared to 2018. This meant growth in employment rates, as Medicaid coverage shrunk as well. Private healthcare covered 67.4% of people, while Medicare and Medicaid covered 35.4%.
The Boom in the Last Five Years
The data may seem outdated right now, especially with the damage caused by Covid-19. Still, it helped establish benchmarks on income, poverty, and health coverage before Covid-19. Before the pandemic, the US enjoyed a five-year economic boom. Without coronavirus, the gains could have carried over to 2020 and beyond.
Coronavirus in particularly affected jobs. In 2019, the jobless rate was at 3.7%. When the impact of the virus hit the US, stores, and businesses had to shut down, along with it 22 million jobs. By April 2020, the height of the pandemic, the jobless rate zoomed to 14.7%. Recently, the job market has opened, albeit slow, and is at 8.4%.
At present, US recovery is slow. Covid-19 infection numbers remain high, so businesses are hesitant to reopen in full. With 6,788,147 infected cases and over 200,000 deaths, declaring that the outbreak is under control is a long way off. A vocal minority also continues resisting safety measures such as masks. This is why the country has one of the highest infection rates worldwide.
Unless a vaccine gets approved later this year, the economy may take longer to recover in full. Mere updates on vaccine trials already excite the stock market. News about possible vaccine approvals pushes industries to prepare for normalized operations. Stock prices on pharma, leisure, travel, and entertainment then go higher.
U.S. Income Statistics
For now, census officials will assess the pandemic’s impact on the 2019 data. This early, they are beginning to that 2019 is the high point for the U.S. economy.
“It is also sobering that this is likely one of the best reports we will see at least for a long time,” H. Luke Shaefer, director of the University of Michigan’s Poverty Solutions center said. He added, “No one yet knows the full impact of the economic and public health crisis that is consuming our lives today and disproportionately impacting the poorest American families.”
Watch this Introduction to Income and Poverty in the United States:
Based on the 2019 census report, it seemed America was in the midst of a boom period. Do you agree that without Covid-19, the United States was enjoying a period of prosperity? What does that imply to the current administration and the market conditions in 2019? Let us know what you think by commenting below.
Gold ‘Frenzy’ To Build Around Election, Platinum Could Soar 50% By Year-End
Peter Hug, head of the precious metal division at Kitco, believes the Fed’s decision to hold interest rates at near-zero through at least 2023 is bullish for precious metals and particularly gold. He also mentioned the road platinum can head to by the year’s end.
“About three Fed meetings ago they indicated they would hold rates at pretty much zero through the end of 2021 into early ‘22, today they’ve extended that by an additional year, there have been some analysts that are suspecting they will keep rates at zero right through 2024, so we’ve got another almost four years of zero interest rates to look forward to,” said Hug.
“The Fed being a bit more accommodative on inflation indicates to me that it’s a very positive environment for hard assets in general but I think the metals as well will continue to move higher over the next period of time based on the dovishness of the Fed, global central banks and the uncertainty of the US election coming up in about six weeks.”
The State of the Gold and Silver Markets
Hug said the current consolidation phase is a great sign of the overall health of the gold and silver markets. This comes after the frenzy in the gold and silver markets about a month ago.
“The market has been consolidating, which is a very good sign, especially for gold. Gold has been consolidating between our support level of 1925 and 1975 for the better part of two weeks. Silver seems to be between $26.50 – $27.50 range and consolidating as well. The fact that people are not selling into a market that is as frenetic as it was a month or six weeks ago, indicates to me that this market is setting up for the next leg higher once we get through this consolidation phase.”
Availability and Premiums
The gold and silver markets are taking a bit of a breather and the mania has slowed a bit. With this, Hug said the availability of gold and silver coins is getting better. He said premiums are coming down as well.
“On the gold and silver side, dealers are starting to show inventory. That’s not a result of increased production, it’s more a result because of this consolidation phase, retail investors have started to pull back on the markets so there’s not as much buying frenzy in the physical space right now, I think that changes if gold gets north of $2,000 again. But this consolidation of $50 range in gold and the $1, $1.50 range in silver has basically dried up the demand at these levels.”
“So production is still coming on board and dealers are starting to build inventory. And because of that you are seeing premiums come down. Silver maple leafs you can get, again, depending on quantity, somewhere between $5-6 over spot, Eagles are down somewhere between $5-7 over spot, so you are starting to see as this market stays sideways and we don’t see another rush into the buying side from the retail investor, you give it another 2-4 weeks and I think there will be reasonable inventory on the market and premiums should come down.”
Volatility to Return Soon?
Hug said that if you are looking to acquire gold and silver coins, you shouldn’t wait long as we could see volatility return very soon.
“I caution that past October 15 the market is going to be very volatile as we go into the election.”
Other than gold or silver, Hug sees a huge opportunity in the platinum space. There, he expects prices to climb 50% by the end of the year.
“I’m constructive platinum. It is also consolidating in the $900-950 range, but I do anticipate platinum to be north of $1000 and then look to $1200 possibly $1400 before year end.”
Dalio: Capitalism Needs Fixing, US Dollar Upended In Next 5 Years
In a recent interview with MarketWatch, Ray Dalio, the billionaire founder of Bridgewater Associates, covered a wide range of topics. These include his thoughts on capitalism, China, the US dollar as the world reserve currency, and much more.
Dalio says the US is facing three distinct problems and is losing ground to China in many ways.
“There are three problems that are coming together,” said Dalio. “So it’s important to understand them individually and how they collectively make a bigger problem,” said Dalio.
“There is a money and credit cycle problem, a wealth and values gap problem, and an emerging great power challenging the existing dominant power problem. What’s going on is an economic downturn together with a large wealth gap and the rising power of China challenging the existing power of the United States.”
“It’s a fact that there has been a weakening of the competitive advantages of the United States over the last couple of decades. For example, the United States lost a lot of the education advantage relative to other countries, our share of world GDP is reduced, the wealth gap has increased which has contributed to our political and social polarization.”
Challenges the U.S. Face
To illustrate the challenges that the US faces as it attempts to stay ahead of China and remain a world power, Dalio says we need to look at Britain and how they eventually lost their position as the world’s reserve currency.
“If you look at British history, the development of rival countries led them to lose their competitive advantages. Their finances were bad because they had accumulated a lot of debt. So, after World War II those trends went against them. Then they had the Suez Canal incident and they were no longer a world power and the British pound is no longer a reserve currency. These diseases almost always play out the same way.”
“The United States’ relative position in the world, which was dominant in almost all these categories at the beginning of this world order in 1945, has declined and is exhibiting real signs that should raise worries. There’s a lot of baggage. The U.S. has a lot of debt, which is adding to the hurdles that typically drag an economy down, so in order to succeed, you have to do a pretty big debt restructuring. History shows what kind of a challenge that is.”
“The United States is a 75-year-old empire and it is exhibiting signs of decline. If you want to extend your life, there are clear things you can do, but it means doing things that you don’t want to do.”
Capitalism Needs Improvements
Dalio is a capitalist (he didn’t become a billionaire through handouts). However, he does acknowledge that the system needs to be improved so that everyone has a chance at financial freedom.
“What has been shown is that capitalism is a fabulous way of creating incentives and innovation and of allocating resources to create productivity. All successful countries have uses for it. For example, communist China has chosen capitalism, which has been essential to its growth.
“But capitalism also produces large wealth gaps that produce opportunity gaps, which threaten the system in the ways we are seeing now.
“We have to be in this together. The system needs to be reengineered to do this. But if we don’t do this engineering well, we’re going to spend in an unlimited way and deal with that by creating debt that won’t ever be paid back, and we will risk losing the reserve currency status of the dollar. If we get into that position — and we’re very close — things will get much worse because we are living on borrowed money that’s financing our consumption.”
On Dollar as the World Reserve Currency
Dalio says we could see the US lose reserve currency status as soon as the next five years.
“Within the next five years you could see a situation in which foreigners who have been lending money to the United States won’t want to, and the dollar would not be as readily accepted for making purchases in the world as it is now.”
“The United States doesn’t have a good income statement and balance sheet in dealing with the rest of the world. It is running a deficit to the rest of the world that is financed by borrowing money so that we are producing liabilities.”
There is uncertainty in the markets ahead of the November election. With this, Dalio says there are two steps investors can take to protect their wealth.
“First, worry as much about the value of your money as you worry about the value of your investments. The printing of money and the debt should make you aware of that. That’s why financial asset prices have gone up — stocks, gold — because of the debt and money creation. You don’t want to own the thing you think is safest — cash.”
“Second, know how to diversify well. That includes diversification of countries, currencies and assets, because wealth is not so much destroyed as it shifts. When something goes down, something else is going up so you have to look at all things on a relative basis. Diversify well and worry about the value of cash.”
Fed Keeps Rates At Zero, Powell Says More Fiscal Support Needed
The Federal Reserve wrapped up its last meeting before the November elections. It announced that it would keep rates at essentially zero until at least 2023. This serves as a signal that it doesn’t see inflation as an issue at all for the foreseeable future.
Fed Chairman Jerome Powell said, “We’re going to continue to monitor developments, and we’re prepared to adjust our plans as appropriate.”
“With inflation running persistently below this longer run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved,” the Fed’s post-meeting statement said.
Uncertainty and the Stock Market
However, the Fed’s latest projections have core inflation staying below their 2% target until 2023. This leaves many observers unsure of the Fed’s actual plan to spur the inflation they desire. This uncertainty caused the stock market to drop after the announcement.
“He noted that targeting an inflation overshoot for ‘some time’ as the statement says, means that they are not targeting a ‘sustained’ overshoot. So how long is ‘some time’ if it isn’t sustained?'” asked AB economist Eric Winograd. “That imprecision is a problem that the committee is going to have to solve to reap the full benefits of the framework shift. It’s not a coincidence that the stock market, which had been in positive territory, flipped negative after the chair’s comments.”
“He’s the great and powerful Oz. Investors got duped. They thought enhanced forward guidance meant something, but when they peeked behind the curtain they realized the Fed didn’t do anything, and the market rolled over,” said Michael Arone, chief investment strategist at State Street Global Advisors.
Jon Hill, a senior fixed-income strategist at BMO, added “This is dovish – lower rates for longer, higher equities, weaker dollar. The Fed is saying we’re not hiking in 2023, maybe in 2024 … What they’re saying is these are our goals. We expect to have just barely met them and even then, they’re not raising rates.”
Stimulus and Economic Recovery
Stepping ever-so-slightly into the political realm, Powell said that Congress should pass another stimulus package to support the economic recovery. He then identified unemployment aid, small business relief and funding for state and local governments as three key areas.
“More fiscal support is likely to be needed,” Powell said. “The details of that are for Congress, not the Fed.”
Republicans have repeatedly stated that they won’t provide additional funding to bailout poorly managed cities and states as part of any additional stimulus bills.
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