New data from the U.S. Census Bureau found inflation wiped out income gains for Minnesotans. If you’ve being getting annual raises but are still feeling the pinch, these numbers may help explain why.
Axios reporter Nick Halter joined MPR News host Cathy Wurzer to talk through income findings in the latest annual survey of residents across the country.
Use the audio player above to listen to the full conversation.
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NICK HALTER: Hey, Cathy. Thanks for having me.
CATHY WURZER: Hey, thanks for being here. Tell us what you found out? What it means?
NICK HALTER: Yeah. We took a look at some of the income data, and we compared sort of income that people had when the survey was taken, which is sort of 2021 income, and then compared it to 2019 before the pandemic hit, and this was adjusted for inflation. And so what we found is that over the first two to three years of the pandemic, that real incomes for people declined, while they-- While people were getting, and I'm talking about Minnesotans here, typical Minnesotans were getting nice pay raises over the past few years. But those pay raises were eaten up by the rising inflation. And as a result, like adjusted for inflation incomes in the Twin Cities fell. The median income fell 5.6%, and the statewide, it fell 4.5%.
CATHY WURZER: OK. Wow. I know you talked to State Demographer Susan Brower about some of this. How did she put this into to some context for us?
NICK HALTER: Yeah. A couple important things to point out. One, this, like I said, this was taken in 2022, but it's really about people how much people were making in 2021. And so there's a bit of a lag in the data. And I think the reason that that's important is, if you look now at what's happening, inflation has cooled here in the Twin Cities faster than any major metropolitan area, meanwhile wages keep going up. So now, at this moment right now, your typical Minnesotan is getting a raise that is above inflation, but we're not going to really see that show up on census data for maybe a year or two from now. So that doesn't mean that what happened two years ago isn't important. And people did lose sort of their household spending power. But it hasn't caught up to what's happening at the moment right now.
CATHY WURZER: I'm thinking probably the last time we saw this was probably around, what, the Great Recession? This particular trend.
NICK HALTER: Yeah, exactly. After the Great Recession, we had real declines in how much people were making relative to inflation. That has been a positive trajectory for the past seven, eight years. And then this is the first time we've seen it fall since the since, like, the recovery from the Great Recession. So it's reversing almost a decade-long trend.
CATHY WURZER: Got it. Did the numbers split up the Twin Cities with the rest of the state?
NICK HALTER: Yeah, the Twin Cities is getting hit a little bit harder. Twin Cities residents' incomes declined 5.6% versus statewide. It was I think 4.5%. So a little bit harder hit in the Twin Cities than the rest of the state.
CATHY WURZER: So we're talking about a median income of about $82,000 or so, that still feels pretty high compared to some other parts of the country.
NICK HALTER: Yeah, that's what's really interesting. I was talking to one of our colleagues, she writes for the Axios in Phoenix. And they are having the opposite going on there right now, which is incomes are actually rising faster than inflation in Arizona. They went up by 4% over the same period, but they still-- the typical Arizonian, as what they call them, they're making about $74,000 a year, whereas in Minnesota, it's $82,000. We have relatively high incomes compared to a lot of states. And even our peer states, like we're $12,000 above Wisconsin, and $18,000 above Michigan. So we're kind of a stand out in that regard.
CATHY WURZER: Hey, how does the state's low unemployment rate play into some of these income patterns? If it does at all.
NICK HALTER: Yeah. It certainly does. We have some of the lowest unemployment rates of the country. I think we've come back to the pack a little bit. But it's certainly a factor. When the unemployment rate is so low, it gives people a lot of leverage to get pay raises.
CATHY WURZER: So even with the median income down, consumer spending reports were up back in 2021 and 2022. Why do you think that is? Do we know.
NICK HALTER: That's a great question. Just kind of remembering back at that time, I know one of the big factors was there was stimulus coming in for people at that point in time. But then the other thing was that people didn't do anything for a year and a half, two years. They were sitting in their houses, and they had sort of built up a lot of of savings. And then as you know it was, kind of-- they called it the revenge spending of '21 and '22, when people were traveling and going out to eat all the time again.
CATHY WURZER: Right. That's good memory there. Say, going through the data, of course, as you heard Joey, there's always something that pops up in this really interesting that might kind of inform other reporting. Other interesting bits of information you found out?
NICK HALTER: I mean our incomes being so high was one thing that I don't think I had really quite realized. I think more just kind of thinking about this data. The one thing that stuck out to me is there's so many metrics right now in the country and in Minnesota that show that the economy is strong. But yet people will say, I don't think the economy is good. And I think this sort of gets at why that is is that even though there's a lot of metrics showing the economy is good, if people's, like household spending power is declining, that's how they view the economy. And this data that we're seeing now gets at why that is-- people, even if they got a raise, that dollar doesn't go as far.
CATHY WURZER: All right, well good reporting. Thank you Nick, we appreciate you joining us.
NICK HALTER: Thanks for having me Cathy.
CATHY WURZER: We've been talking to Axios Twin Cities reporter Nick Halter. By the way, you can always sign up for the Axios Twin Cities newsletter. I get it every morning, it's fantastic. Check it out when you have an opportunity.
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