Friday, September 18, 2015

Some Friday good news: real retail sales and real aggregate wage growth

 - by New Deal democrat

I have not been a happy camper here at Camp Bonddad this week.  First, contrary to my expectation, the Census Bureau reported that real median household income actually *declined* by about -0.5% for the prime working age 25-54 cohort.  The main reason, apparently, was a seemingly random increase in the percentage of non-family households, which disproportionately consist of low wage earners.

Then the same Census Bureau wreaked havoc with housing permits, perhaps the most important among long leading indicators.  These went from making new highs several times in the second quarter, to no new high having occurred since 10 months ago.  Did I mention, these are invaluable for looking at the economy 12+ months out? So, suddenly, we are only 2 months away from no new highs for a year.  Awesome.  Except, oh by the way, housing starts still show the improvement, as do the non-seasonally adjusted numbers, even after the latest revisions.  Would it really be too much effort to supply us with an explanation?

So let me point out two things which *did* go right this week, courtesy of a -0.1% decline in CPI:  real retail sales and real aggregate wages.

First of all, real retail sales made a new high:

This bodes well for employment growth in the coming months, since consumer spending leads jobs.  Since population increases by a little under +0.1% per month, this means real retail sales per capita, a long leading indicator, also made a new high in August.

Secondly, real aggregate wages also grew, bringing total growth over this economic expansion to +17.0%:

For comparison purposes, here is the Reagan expansion of the 1980s:

At this point (5 years, 9 months into the employment expansion) in the 1980s, real aggregate income was up +18.5%.  Our present expansion isn't quite so good for aggregate real wages, but not too shabby either.

To bring this full circle, here is a regression of real aggregate wage growth vs. real median household income:

Note that this year was one of the two biggest outliers to the negative. Typically based on real aggregate wage growth we should have seen decent growth to real median household income.