Recovery?? Quarterly Increase In Wages (ECI) Is Smallest On Record

The quarterly increase in US wages was just 0.2% according to the latest release of the Employment Cost Index.

In fact, it is the lowest on record.


The ECI tracks worker compensation over time, so it has some advantages over competing measures of wage growth (which are also lousy).
Of course, with 93.6 million NOT in the labor force, it is difficult to get wage growth.

Not exactly great news for the housing and mortgage market. With 7,443,580 U.S. residential properties that are seriously underwater, low wage growth is as unwelcome as a scorpion in your shoe in the morning.


Yes, it is part of the great bartender recovery!


U.S. Economy Picked Up in Second Quarter To 2.3 Percent, But Not Wage Growth (30Y Treasury Yield Falls)

Although GDP growth of 2.3% is still below the average GDP growth rate since 1947 of 3.2%, some analysts are saying that a gradual raising of rates by The Federal Reserve is “reasonable.”

(Bloomberg) — The world’s largest economy expanded at a faster pace in the second quarter and managed to eke out a gain at the start of the year, painting a picture on incremental progress consistent with the Federal Reserve’s view.

Gross domestic product rose at a 2.3 percent annualized rate, and a revised 0.6 percent advance in the first quarter wiped out a previously reported contraction, Commerce Department data showed Thursday in Washington. The median forecast of 80 economists surveyed by Bloomberg called for a 2.5 percent gain. Consumer spending grew more than projected.

The economy has moved beyond some of the early 2015 constraints including weather and port delays, while cooling global markets, a strong dollar and insufficient wage gains may continue to limit growth. Fed officials, considering when to begin raising rates this year, concluded on Wednesday that the U.S. is making progress.

“We have plodding, modest yet durable growth,” Michael Gapen, the New York-based chief U.S. economist for Barclays Plc., said before the report. “A gradual raising of rates is reasonable” for the Fed.

Average wage growth (2%) still remains below GDP growth rate (2.3%).


According to the Atlanta Fed GDP NOW report, the spike in GDP in June was … residential investment.


The GDP report was lower than the expected 2.5%. Hence, the 30 year Treasury bond yield slipped below 3%.


Bubble-up! Fed policy is working (at least for creating massive asset bubbles, not for wage growth).


Limbo Rock Homeownership: Census Reveals That US Homeownership Rate Falls Back To 1965 Levels

To quote Chubby Checker from the song Limbo Rock, How low can you go?”

According to the US Census Bureau, the homeownership rate has slumped back to 1965 levels.


Of course, the sad thing is that despite the trillions of dollars of Treasury and MBS purchases by The Fed, homeownership keeps falling and median rents for housing keep rising (to record levels).


The Fed is having a “limbo party,”  And I don’t think that homeownership has gone low enough.

limbo (1)

Rate Trek II: The Wrath Of Janet (Fed Accidentally Releases Suggestion For 1 Rate Hike in 2015, 4 In 2016)

When you have bad news for consumers, it’s best to float a trial balloon by “accidentally” leaving staff projections in the data dump ahead of the June meeting.

Internal economic forecasts prepared by Federal Reserve staff ahead of the June policy meeting were posted on the U.S. central bank’s website late last month, years ahead of schedule, the central bank said Friday.

The projections, which normally are made public only after a five-year lag, were “inadvertently” posted online June 29 within a package of files related to the Fed’s FRB/US model of the economy. A Fed spokeswoman said the accidental release went unnoticed at the central bank until Tuesday, when a Fed economist discovered it.

The files are being kept online “because the information has already been released,” the Fed said in a statement. The Fed spokeswoman said the matter was referred to the Fed’s inspector general Thursday; the inspector general on Friday declined to comment.

….the projections suggest 1 rate hike before year end; and 4 hikes in 2016, with end 2016 Fed Funds rate of 1.26%.

Or as Captain Kirk said in Star Trek II: The Wrath of Khan, “Here it comes.”

Janet Yellen at the helm of the USS Federal Reserve.