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POLITICS: PennAve

The week ahead in economics: Declining wages color incoming data

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Taxes,Jobs,2008 Financial Crisis,PennAve,Joseph Lawler,Economy,Federal Reserve,Budgets and Deficits

One datapoint from last week’s economic news stood out: median household income has declined since the recession ended.

As reported by the New York Times, a Sentier Research analysis of Current Population Survey data shows that the median U.S. household has experienced a 4.4 percent drop in the amount of pre-tax income since the official end of the recession in 2009. Although incomes are rising and families are making more than they were in the depths of the recession, the median household is making only $50,700 — that’s $2,400 less than at the end of the recession, and $3,400 less than at its beginning.

The Economic Policy Institute, a left-of-center Washington think tank, analyzed the same CPS dataset and concluded that between 2002 and 2012 “wages were stagnant or declined for the entire bottom 70 percent of the wage distribution. In other words, the vast majority of wage earners have already experienced a lost decade, one where real wages were either flat or in decline.”

Although economic reports this week are likely to show a gradually improving picture, the background conditions are “what wage and compensation stagnation looks like,” as EPI concludes in its report.

On Tuesday, the Standard & Poor’s Case-Shiller home price index is expected to show housing prices increasing in June at the same rate they did in May, at a 12.2 annual clip. Last week’s existing and new home sales reports raised the possibility that rising mortgage rates are becoming a cause for concern for potential homebuyers.

The Commerce Department will issue its second revision of estimates of second-quarter growth on Thursday. Initially the report showed weak growth of 1.7 percent, but analysts expect it to be revised up to 2.2 percent on Thursday. The report also will include a measure of inflation that the Federal Reserve gives special attention.

And on Friday, the Commerce Department will release personal income data for July. Economists expect income to have grown 0.2 percent last month, and 3.4 percent over the last year. Americans will need many months of sustained gains in personal income to reverse the losses of the past few years.

Three Federal Reserve officials will give public speeches this week, including two from St. Louis Fed President James Bullard, the most “dovish” current voting member of the Fed’s monetary policy committee. Investors will look to his comments especially for hints of confirmation of the Fed’s plans to reduce its stimulus bond purchases next month.

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