Squeeze on Wage Earners Accelerates
The BLS is reporting Real Earnings Drop .5 percent in April.
Real average weekly earnings fell by 0.5 percent from March to April after seasonal adjustment, according to preliminary data released today by the Bureau of Labor Statistics of the U.S. Department of Labor. A 0.3 percent decline in average weekly hours and a 0.5 percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers were partially offset by a 0.2 percent rise in average hourly earnings.
Data on average weekly earnings are collected from the payroll reports of private nonfarm establishments. Earnings of both full-time and part-time workers holding production or nonsupervisory jobs are included. Real average weekly earnings are calculated by adjusting earnings in current dollars for changes in the CPI-W.
The BLS also reported the Consumer Price Index for April 2007 today.
On a seasonally adjusted basis, the CPI-U advanced 0.4 percent in April, following a 0.6 percent increase in March. The index for energy increased 2.4 percent after advancing 5.9 percent in March. In April, the index for petroleum-based energy rose 4.6 percent versus a 10.1 percent increase in March. The food index rose 0.4 percent in April, slightly more than in March. The index for all items less food and energy advanced 0.2 percent in April, following a 0.1 percent rise in March; the index for shelter rose 0.3 percent after advancing 0.1 percent in March, resulting from an upturn in the index for lodging away from home.
Seasonally Adjusted CPI
Wages are not keeping up with costs. There is no other way to look at it. Yes home prices are dropping but with fewer and fewer people buying homes, the drop in home prices is simply not helping many.
Bloomberg is reporting U.S. Median Home Price Tumbles to 2-Year Low in Slump.
U.S. home prices tumbled to a two-year low in the first quarter, with declines in almost half of U.S. cities, the National Association of Realtors said.
"The market is clearing itself as the lower prices lead to less supply," said Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut. "Over time that will help to bring supply and demand into equilibrium."
Over Time. Yeah right. Like how much time? Three Years? Five years? The statement is absurd actually given that inventories are still rising. In the meantime the slump in housing prices continues to cut off the housing ATM, removing a key source of funds for cash strapped consumers.
As Lance Lewis pointed pointed out today on Minyanville, the numbers excluding food and energy (what the Fed likes to look at), are now magically below the 2 percent threshold. If the Fed wants an excuse to cut, the 3 month rate in CPI excluding food and energy paves the way.
Unless that rate cut translates into lower mortgage rates, however, it will not help one iota. For those in the group of 430,000 First Quarter Foreclosure Filings it is already too late. Coupled with the latest weak jobs report as noted in Birth Death Model Fatally Flawed and Nonfarm Payrolls Vs. Gov't Payrolls a disaster is forming.
Real wages are declining and corporate profits are not shared with wage earners except at the very top end. That skew makes the decline in wages worse than it even appears (and it appears bad). The squeeze on consumers is accelerating.