If Real Wages Aren’t Rising, How Is Household Income Going Up? (Brookings Ignores The Federal Reserve Effects)

The prestigious Brookings Institute (home of former Fed Chairs, Ben Bernanke and Janet Yellen) has an interesting albeit misleading piece on the on why household income is rising while real wages are not.

The authors focus on 2015-2018 to highlight the Obama years (2015-2016) and the Trump years (2017-2018). Brookings makes it look like hours are up under Trump while wage growth has shrunk to the size of Melania Trump’s waist.

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An alternative view of what is happening is presented here:

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Yes, if you believe the real hourly earnings numbers, they have declined in terms of growth under the Trump Administration while real median household income has exploded!

Two tibits. 1) real hourly earning YoY are still higher in 2017-2018 than in 2009-2013. 2) Brookings ignore the pre-2014 era.

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Real median household income ({RMINC) looks far better from 2014 to 2017 than it did from 2007 to 2012 (orange line). Yes, that declining RMINC line looks pretty bad if you are trying to convince voters that the economy is doing well. Particularly with average hourly earnings plummeting and remaining stagnant until 2015.

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So, in 2013, President Obama’s Administration and the US Census Bureau decided to change the way RMINC was measured.

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Starting in 2013 with a partial phase-in, which was fully implemented in 2014, Census changed the questions and the methods in calculating household income.

For example, Census, starting in 2014, began to “collect the value of assets that generate income if the respondent is unsure of the income generated.

Also, the government started to use “income ranges” as a follow-up for “don’t know” or “refused” answers on income-amount questions.

Okay, so guess the assets that you have that are generating income. The fact that the US has experienced massive growth in stock and housing prices thanks, in part, to The Fed’s highly accommodating monetary policies, particularly since wage growth has been so stagnant since 2009.

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Not only did Brooking leave out the “wealth effect” generated by Federal Reserve monetary accomodation, they also left out that nominal average hourly earnings growth YoY is higher than anytime since 2009; it is only since The Fed began raising its target rate that real hourly earning growth has plunged.

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Brookings deserves the Three Pinocchios rating for a grossly misleading analysis.

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Hi-Diddle-Dee-Dee, a Brookings analyst life for me!

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Slowdown! Home Prices in 20 U.S. Cities Post Smallest Gain In 11 Months (Dow 30 Enters Overbought Zone)

Slowdown!

The Case-Shiller home price indices are out for July.  And US home prices rose 6% YoY. With Washington DC remaining the slowest growing metro area in the US in term of home prices (with Las Vegas NV as the fastest growing).

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Yes, home price growth nationally is slowing down to the lowest in eleven months.

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And on the stock market front, the Dow Jones Industrial Average might have run too far, too fast, according to one technical signal. The GTI Global Strength Indicator, which measures upward and downward movements of successive closing prices, entered overbought territory last week and remained there at the start of the current one. The benchmark shed 181 points to close at 26,562 on Monday after gaining 2.25 percent over five days through Sept. 21, its best performance since the week ending July 13.

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Investors will be pleading for the Federal Reserve to not let them down.

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