Per capita disposable income

The financial meltdown and recession in 2008 reversed a 17-year streak of growth in disposable incomes. The primary drag on income was felt by millions of Americans who lost their jobs or were unable to join the workforce for the first time. Job losses started in the financial sector, but quickly spread from Wall Street to Main Street as credit tightened and businesses saw demand wither in the face of uncertainty. The national unemployment rate climbed from 4.6% in 2007 to 9.6% in early 2010, crippling spending power across the United States and through all income brackets. Even Americans who retained their jobs were afflicted by stagnant wages, furloughs and diminished nest eggs. Given the possibility of an even bleaker future, individuals increased their savings rate from 3.2% in 2005 to 6.1% in 2009, reducing the amount available for purchasing goods or services.

The effect of job losses and higher savings were partially offset by a larger safety net, with government assistance programs extended and expanded to unprecedented levels. However, these programs could only partially negate the effect of the economic collapse, with per capita disposable income slipping by 0.6% in 2009. However, conditions stabilized in 2010. Firstly, corporate profit surged, generating profit for owners and restoring battered stock portfolios. This eased pressure on businesses to keep wage costs down and boosted consumer sentiment, leading to both higher earned incomes and a receding savings rate. Consequently, per capita disposable income increased 1.0% in 2010. These initial signs of recovery were expected to make further gains in 2011 and 2012, paving the way for a more robust rebound. However, the rebound was limited by unrelenting unemployment, a housing market trapped in the doldrums and public debt, both domestically and abroad. Consequently, disposable income growth remained weak.

In 2013, per capita disposable income declined 2.2%, which can be partly attributed to new tax regulations implemented that year. In particular, during 2013, many businesses experienced a payroll tax hike due to the Affordable Care Act resulting in an additional Medicare tax. While the Medicare tax only applies to individuals in specific tax brackets, it still cut into per capita disposable income for these aforementioned demographics. Moreover, the cap on earnings subject to the Social Security payroll tax increased that year.

In recent years, as labor markets have tightened, wages have been pushed up. This has supported greater income levels for individuals; however, gains have not been distributed evenly. Moreover, recent policy agendas focused on minimum wages have increased disposable income levels. In 2019, per capita disposable income grew 2.6%. While wage growth has lagged behind employment gains in terms of average wages, there was upward pressure in 2019.

Per capita disposable income levels dropped in 2020 because of the COVID-19 (coronavirus) pandemic and ensuing economic fallout. In response, accommodative fiscal policy in the form of direct stimulus payments and tax breaks resulted in disposable income increasing 6.0% over the year. Overall, while economic recovery has been strong, surging inflation and a tightening monetary policy have stressed levels.

Following the Federal Reserve's decision to aggressively raise benchmark interest rates multiple times during 2022, a tighter policy has affected budgets and decreased disposable income. After the ending of government stimulus, per capita disposable income decreased 6.1% during 2022 alone. Meanwhile in 2023, per capita disposable income returned to growth and increased 4.2%. However in 2024, the cost of living continued to increase, as a prolonged period of high interest rates affected disposable income levels. Despite these trends however, disposable income levels increased 1.8% during 2024 and 2.6% in 2025, as interest rates began to fall and energy costs begin to recover amid mounting domestic gas production. If the Trump Administration goes ahead with imposing tariffs, it will increase consumer costs in 2025, which could limit the growth of disposable income as this puts pressure on household budgets.