American household income fell in May, even with the unemployment rate at the lowest level in almost 50 years.
Median household income fell 0.6% from the prior month to $63,799, according to a report by Sentier Research on Tuesday. That’s combined gross wages plus retirement and military benefits of all people sharing a housing unit. The unemployment rate in April and May was 3.6%, the lowest since December 1969.
Stagnant or even falling wages are making it tougher for Americans to get mortgages to buy homes, evan as loan rates fall, according to Robert Dietz, chief economist for the National Association of Home Builders. While corporate profits and C-suite compensation have spiraled higher during the economic expansion, workers haven’t had much to celebrate, he said. Adjusted for inflation, household income has barely budged over the last two decades, according to Sentier Research.
“When you’re talking about affordability, you’re not just talking about mortgage interest rates – you’re talking about home prices and household income,” Dietz said in an interview. “Since the end of the Great Recession, while we’ve had a very good improvement in the unemployment rate, wage growth has been lackluster.”
Mortgage rates are near three-year lows, according to Freddie Mac. But that hasn’t sparked the buying activity it has in the past, Dietz said. In the past year, there have been some months that showed acceleration in household income, but the numbers have remained “lackluster,” he said.
“We have seen a pretty dramatic and quick decline in mortgage interest rates, but so far we haven’t seen a very noticeable uptick in home construction and home-sale activity,” Dietz said.
Corporate profits and the wages of workers moved somewhat in tandem for more than five decades following World War II, according to the Federal Reserve. In 2003, corporate profits left wages in the dust with a record spike until the Great Recession caused them to plunge below the wages of workers. Near the end of 2009, the surge in corporate profits took off again, creating another historic gap between workers and corporate profits.
“We are at a point now where real median household income is 3.4% higher than January 2000,” said Gordon Green of Sentier Research. “Not an impressive performance by any means over a period spanning almost two decades, but the overall trend line has been positive for about seven years.”
Lackluster wage growth has kept a portion of U.S. workers living from paycheck to paycheck, said Mark Zandi, chief economist of Moody’s Analytics. He pointed to a Federal Reserve report in May that said about 40% of American adults wouldn’t be able to cover a $400 emergency without resorting to credit cards they couldn’t pay off right away.
“It’s indicative of the financial fragility of a large chunk of the population,” Zandi said in an interview. “Probably half the population is living pretty close to the edge.”
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What is not talked about is the depreciated value of that median income due to the declining value of the dollar due to inflation.
Federal, state and local government keeps spending more to keep up with inflation while the tax paying public and retired seniors are struggling to make ends meet.
Why isn’t government struggling? Because sheep never fight to defend themselves. And when they do get restless the goats are there to subdue them.
But then there are the individuals that are awake and realize that the wolves and sharks that run this system for their own food cannot control everyone and so run their own life and control their own destiny by being sly.
Amen, Amen, T-bird!! Trump doesn’t seem to care about reducing the size of government either. Cutting spending is the only way to rid the people of swamp creatures…….
What happened to the Tea Party? Mostly retorical, as we know the establishment killed them – from Barry O to Mc Connel/McCain/Boehner et. al. But why are they not back?
We also can’t ignore the fact that it is the under 30 crowd which is at record-low home ownership ( for past 70 years.)
Stuck with ridiculous student loan burdens, boomers working longer in the better paying jobs, declining marriage rate and low birthrate– millenials simply are not buying their own homes.
For most people Home Ownership is just an added cost and it can dramatically decrease your mobility to pursue better employment. It’s good that few under 30 have homes, that’s a time frame where flexibility and mobility are very good things. Home in most areas are like anchors that cost a lot more than renting. Too many young people only look at the rent payment vs. the mortgage payment, my youngest brother previously viewed it this way. Him and his wife were chomping at the bit to buy a home w/ a 30yr mortgage. I then showed him roughly how much we have paid in fixing things in a decade plus the taxes. New furnance, new gutters, partially new roof, trees removed professionally, plumbing work. Any cosmetic upgrades we did ourselves, that included new flooring, and putting in carpeting ourselves. Otherwise it would be a helluva lot more. I built all my own fences and repaired a million smaller things around here over the years. I’ve rebuilt the back deck, fixed the front porch and with help from family redid alot of other things.
He is now waiting, once he realized he would be actually paying twice the asking price with all the interst to the bank, and would be paying about 40k/decade in property taxes, plus all the other things that can and will go wrong with an older house. They struggle to come up with over 1k to fix their cars, so they damn well shouldn’t be taking on a house like its some magical piggy bank. In most areas the house prices only look good b/c of inflation being so dramatic over the decades. Also the “real” cost of the house has to include not only interest but all the repairs done to the place, it ends up being a very expensive venture. But originally he just looked at a house like gee the mortgage payment is 800 (they don’t include taxes on the website) that’s the same as my rent…. Home ownership is a mixed bag, and is not something to into lightly. And after all is said and done without alot of protections and money spent Medicaid etc can end up owning half your home b/c of nursing care for a spouse being unbelievably expensive. So sometimes you can’t even leave your house to your kids b/c you end up having liens on it.
Zero Hedge has this one totally wrong, in my humble opinion….
Why did they BLINDLY quote statistics from the BLS? Unemployment, inflation, worker participation are all mangled and distorted by the government to serve their own means (keep interest rates low to finance their ponzi scheme and screw main street and fixed income people)! Jim Quinn has already opened a lot of people’s eyes on this.
Just think about what they said – unemployment at 3.6%, the lowest since 1969! If the ANYONE decides to compare current unemployment levels today to the 1969 level, then they should use the method of calculation used in 1969. In the real business world (not government or zombie, fascisit, ‘progressive’ companies controled by the state) we call this comparison ‘apples to oranges’. The comparison made by ZH is totally worthless.
Why?
1) If unemployment were so low, then why did personal income NOT rise? Answer: Unemployment is realistically at 10-15%; U6 does not provide total accuracy, as it relies on the same BS “survery” that the U3 uses. And two, we have tens of thousands of “illegals” coming in every month, along with our massive worker visa programs helping to keep labor demand low. How about some data here ZH?
2) Adding 214K jobs last month was hearalded like a cure for cancer! The trained seals in the media were euphorically clapping with front fins. Real story is that it takes 200K+ new jobs each month to keep up with population growth (new workers who ‘graduated’ from indoctrination camps, er, I mean public schools and colleges). And no one mentions worker participation, which is at the same levels as during Barry’s great Recession – and those leaving the worforce each month usually equals the ‘new jobs’ number. These people go off the grid because they are not reported in U3 or U6 unempoyment.
I encourage you to look at their data on line.
3) ZH totally omitted indicting a major bad actor – the FED! They steal any wealth you may accumulate, by stoking inflation and the everything bubbles they have created since the 2008 debacle. Their mantra is that a little inflation is good! Lower prices and deflation – bad. People, this is the authoritarian state, with almost total command and control of the economy feeding you crap. Since when are lower prices, saving money and earning reasonable interest income a bad thing? 1) Cost of money needs to be derived from market forces – NOT the apparatkics in FED/DC cabal. 2) The only real wealth creation comes from capital formation driven by manufacturing and comparative advantages. 3) DC/ FED policy is to go negative interest rates, eliminate hard currency and make sure we all have a hefty amount of debt.
Ever wonder why the chasm between the 1% and the 99% is at its widest?!!
We know it has not worked well; $24 trillion in debt; approximately $200 trillion is unfunded future liabilities, fiat currency that is virtually worthless versus gold.
Excellent synopsis…
And, don’t forget the debt! Debt must expand at a greater rate each year in order for GDP to grow. It took me awhile to grasp that simple fact. I believe we’re hitting, or have hit debt saturation. I have no doubt negative interest rates are in our future; they have to be. ..
The housing market is plenty goosed if you ask me. Prices seem to be up about 10% in the last year.