Reply #8: Wage Decline [View All]

Continued rise in home prices cannot be sustained if wages continue declining. Some of the fundamentals of housing price appreciation is that either wages, inflation, or rental rates must increase to sustain the home price increase. None of these have occurred.

WAGE DECLINE

Wage stagnation and decline have continued this year, despite the statements by the government that the economy is "strong, and getting stronger." Inflation-adjusted hourly wages have continued to decline through the month of June, according to the Bureau of Labor Statistics. June's inflation-adjusted wages declined 0.6% from May. June's inflation-adjusted $8.13/hour marked a decline from May's $8.18/hour. This also marks a 1.2% decline from April's inflation adjusted $8.23/hour. At this rate, wages would decline a whopping 7.2% over 12 months.
This information can be found at the U.S. Bureau of Labor Statistics site at:
http://stats.bls.gov/news.release/realer.t02.htm

June's weekly, inflation-adjusted income declined 0.8% to $274.95, from May's $277.29. June's decline marked a 1.7% decline from December 2004's weekly income of $279.73. Going back further, June's decline represents a 1.8% decline in the weekly wages from December 2003, which were $280.09/week.

Here is a graph of per capita real disposable income from the Dept. of Commerce. They use a different inflation measure than the Bureau of Labor Statistics, "chained 2000 dollars," which deliberately understates inflation. Even with this understatement of inflation, wages have clearly been stagnating since the beginning of 2005. Note in the graph below the lack of increase since January of 2005.


(Note: the above chart includes all income, including stock dividents and other non-wage sources of income.)


Wages definitely have NOT recovered during our alleged "recovery." In contrast, corporate profits have soared. Can the dividend income increases of the affluent maintain housing prices? Can housing prices be maintained by increased corporate profits and increased borrowing alone?

unlawflcombatnt