Fed’s Yellen: “We Don’t Need No Stinking Wage Growth!” Despite Not in Labor Force Rate at 37.3 Percent

Well, the Federal Reserve Chair Janet Yellen didn’t exactly say the famous line from the Humphrey Bogart/Tim Holt film Treasure of the Sierra Madre, “We don’t need no stinking wage growth.” But according to the Wall Street Journal’s Jon “The Omen” Hilsenrath,

“Ms. Yellen said explicitly in that March speech that she is prepared to start moving interest rates up even before she sees sure signs that wages are rising faster. “That said,” she added, “I would be uncomfortable raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken.”

Given her stance, Friday’s employment cost report doesn’t look like a deal breaker for the Fed in its long-running debate about when to raise short-term interest rates. Wages appear to be stagnant but not clearly weakening, which is what she set out as her threshold for not acting. Still, it creates new doubts for officials and doesn’t help them build the confidence they’re hoping to build that the job market is nearing full employment and inflation rising toward 2%.”

True, the Employment Cost Index is at an all-time low. But the percentage of people NOT in the labor force is now 37.3%.

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The NOT in labor force rate is the number of those NOT in the labor force divided by the sum of those in the civilian labor force and those NOT in the labor force.

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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.

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The ECI tracks worker compensation over time, so it has some advantages over competing measures of wage growth (which are also lousy).
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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.

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Yes, it is part of the great bartender recovery!

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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.

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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).

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

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