Only 12 percent of adults recently surveyed by Gallup cited some aspect of the economy as the most important problem facing the United States. That is an all-time low for this poll and it highlights how much things have improved since the “Great Recession” when a record 86 percent of Americans cited the economy as the country’s biggest problem. The strong labor market has been a major factor behind the rebound in economic confidence, especially now that wage growth is showing signs of accelerating. For example, a new report from the U.S. Census Bureau showed that the median household income in America last year was $61,372. That is an inflation-adjusted 1.8 percent increase from 2016, the third annual gain in a row, and the highest level of median household income ever recorded.
During this same period, the poverty rate in the United States fell for the third consecutive year and ended 2017 at the lowest level since 2006. More recent data from the Bureau of Labor Statistics revealed that average hourly earnings in America rose by 2.92 percent in August on a year-over-year basis, the fastest pace of annual growth recorded in nearly a decade. Although still well below the rate of wage increases seen prior to the last recession, the latest uptick in hourly earnings suggests that more employers are being forced to respond to the tightening labor market by boosting worker compensation. Should this trend continue, many Americans may not only see more substantial pay increases in the years ahead but also greater access to tax-advantaged 401(k) plans and accompanying matching contributions. That would be great news for retirement readiness in this country because countless studies have demonstrated that the sooner a person can start setting money aside in a 401(k) plan the better.
Further, if wage gains continue to pick up and inflation remains under control, the resulting boost to disposable income could enable many Americans to finally set up an emergency fund. These short-term savings can help people overcome an unexpected financial hardship without having to dip into their retirement assets. Even with wage growth where it currently is, though, a new AARP survey encouragingly found that more than seven in ten working adults would already be willing to participate in a “payroll-deduction rainy day savings program” if their employer offered one. Respondents cited setting aside more money and reducing financial stress as the top reasons they are open to participating in such a program. This survey, according to The National Association of Plan Advisors, comes as “Congress is poised to consider legislation creating so-called Universal Savings Accounts that would permit individuals to make annual contributions up to $2,500 that could be withdrawn at any time for any reason without tax penalties.”
Sources: Gallup, U.S. Census Bureau, U.S. DoL, AARP, NAPA
Post author: Charles Couch