In their most recent release, the Census Bureau reported that median annual household income in the U.S. rose by 1.3 percent in 2007 to $50,233. In addition, real earnings for both men and women also experienced gains in 2007. Real median earnings for men and women who worked fulltime on a year-round basis rose 3.8 percent and 5 percent respectively, following three years of annual declines.

But in spite of this relatively good news, the reality is that 35.5 percent of American households still bring in less than $35,000 annually.

Furthermore, for households in the 20th percentile of income distribution, annual income actually fell 1.5 percent to $20,291. It is how these low to moderate income households have faired since the end of 2007 that remains a focal point to creditors and the accounts receivable management (ARM) industry regarding collections performance.

Although the sharp increases experienced in consumer prices over the months of May, June and July have only acted to further strain these low to moderate income households, of particular concern has been the health of the job market.

Unemployment – arguably the most important factor in ARM industry performance – now stands at 5.7 percent and inflation is now at 5.6 percent, so it is obvious that the income gains reported for 2007 have not held. As these less affluent households contend with their debts and other obligations, the job losses observed through the first half of 2008 are widely expected to continue into 2009.

What is certain is that current incomes are lower than their 2007 levels and with disposable personal income (DPI) having decreased by 1.9 percent in June, the likelihood of a turnaround in collections performance from a disappointing second quarter is unlikely.