Money isn't everything

American Demographics, July, 1996 by Elia Kacapyr

Despite income and employment gains in February, the American Demographics Well-Being Index gave back almost three-quarters of a percentage point that month, falling to 101.83. This is the single largest one-month decline the index has experienced since the base month of April 1990, although two consecutive drops in early 1993 resulted in a slide of nearly 1 percentage point. Its current reading indicates that the average level of well-being in the United States is 1.83 percent higher than in the base month of April 1990.

Analysts typically use some measure of income when gauging living standards. The American Demographics Index uses an after-tax measure known as "disposable" income. Since taxes are already paid, people can do just one of two things with this money--save it or spend it. It is measured on a per-capita basis to account for population increases that may eat away any gains in income. It is also adjusted for inflation. After all, getting a 2 percent pay raise when prices are up 3 percent effectively yields a 1 percent decrease in purchasing power.

The national economy showed surprising strength in the first quarter of 1996, and February's income and employment statistics reflect that performance. After-tax, per-capita, inflation-adjusted income was up 0.5 percent from January. The employment rate increased 0.3 percent, to 94.5 percent. Combined, the income and employment sector of the Well-Being Index rose 0.4 percent. Only once since April 1990 has this sector shown a larger month-to-month gain. A dramatic 1.8 percent gain in December 1992 was an aberration caused by the early distribution of annual bonuses to beat a change in tax laws that took effect in 1993.

                        Trends in Well-Being