Thursday, November 20, 2014

Failure to deflate: flat consumer prices only slightly help real wages, sales


 - by New Deal democrat

Usually changes in the inflation rate are all about the price of gasoline.  Not in October.  Although gas prices fell -6.4% (compared with a decline of -5.0% a year ago), unlike one year ago net consumer price failed to decline, instead remaining flat.

Over a two month period, a -8.6% decline in gas (vs. -6.1% in 2013) coincident with a 0.1% increase in prices, vs. a gain of +0.2% in 2013.  There seems to have been no single culrpit.  A wide variety of other prices slightly more than expected.

As a result, while measures of real sales and real wages did increase, they did not do so as much as expected.

First of all, here are real retail sales:



These returned to August levels.

Real retail sales per capita are a long leading indicator, typically turning one year or more before the economy as a whole.  October's increase still leaves these below August's level:



Real wages also increased, but are still below February's level, and are still about 0.7% below their 2010 post-recession peak:



Of course, even that level was below virtually the entire 1970s peak for real wages:







Wednesday, November 19, 2014

New post-recession high in building permits


 - by New Deal democrat

October building permits came in at the highest level since January 2008.

This is unequivocal good news, not just for now, but for the economy going through 2015.

I'll have more later at XE.com, and I'll update with a link. And here it is.  This has important implications for 2015.

Trends in wages - some comments


 - by New Deal democrat

My biggest focus now is what is happening with wages.  I've done quite a bit of number-crunching, but I have to do more time consuming number crunching in order to make the results more presentable.

In the meantime, let me tell you what the general results are:

1.  It isn't just a low wage recovery any more.  In the last 18 months, 1/3 or more of all jobs created have been high wage jobs.  Mid wage jobs, however, are still lagging.

2.  Almost all measures of wages, both average and median, have been slowly rising this year, and in particular rose in the third quarter.

Once I have the inflation adjusted charts and graphs ready, I'll post in more detail.

In the meantime, the Economic Policy Institute published an update on wages through the first half of this year, indicating that real wages fell slightly compared with the first half of 2013 across almost all income classes.  Although I question the metric - why measure first half to first half of years, if the data is seasonally adjusted? -  this is a good and thorough read.  I suspect the EPI arrived at a contrary result - wages slightly falling vs. slightly rising - because their source data was from the same panel that the BLS used in its "usual weekly earnings" series.  This data had an anomalous big decline in the second quarter, that wasn't present in any other series.  BTW, it rebounded in the third quarter.

In the larger view, I share the dismay that wages have been stagnant since the turn of the Millennium, and even as far back as since the 1970s, especially where so much income and wealth has been funneled to the very topmost segment of society.  It is simply not an economy which is functioning well if most of its participants do not benefit, or benefit very little, from its growth.  In the 1980s, the middle class coped by spouses joining the workforce, and by refinancing debt at lower interest rates.  The refinancing at lower rates continued periodically throughout the 1990s and 2000s.  Some people benefitted - temporarily at least - from participating in the stock or housing market bubbles.

This is not going to happen any more.  Income gains by the middle and working class in the US has since 2009 and will in the future continue to happen, when it happens, the old-fashioned way: by actual real growth.

Tomorrow October consumer inflation will be reported.  If it declines as expected, that may mean a significant jump in real average wages.  I'll follow up then.