Income is rising and so are wages. Even real income is up. But real wages are another matter...
Personal income data from the BEA, hourly wages from the BLS, real hourly earnings and chart by Mish.
Personal Income vs Hourly Wages Notes
DPI means Disposable Personal Income. Disposable means after taxes.
Real DPI means inflation adjusted using the Personal Consumption Expenditures (PCE) deflator. Real DPI is a BEA calculation.
Average hourly earning are for production and nonsupervisory workers.
Real wages are deflated by the Consumer Price Index (CPI) not the PCE.
The BLS does not report a real hourly wage. I used the CPI-W index for production and nonsupervisory workers, produced by the BLS, as the deflator.
Personal Income Definition
The BEA defines personal income as “Income that people get from wages and salaries, Social Security and other government benefits, dividends and interest, business ownership, and other sources.” Rental income is a part of other sources.
Three Rounds of Fiscal Stimulus
Round 1, March 2020: $1,200 per income tax filer, $500 per child(CARES Act) – Trump
Round 2, December 2020: $600 per income tax filer, $600 per child (Consolidated Appropriations Act, 2021) – Trump
Round 3, March 2021: $1,400 per income tax filer, $1,400 per child (American Rescue Plan Act) – Biden
The three rounds of free money fiscal stimulus (literally a helicopter drop), plus eviction moratoriums put an unprecedented amount of money in people’s hands. In addition, unemployment insurance paid people more to not work than they received working.
The third round of stimulus under Biden was totally unwarranted. However, it is also worth noting that Trump wanted a much bigger second stimulus package than the Republican Congress gave him. Trump is no fiscal hero.
The three stimulus packages, on top of supply chain disruptions, energy disruptions due to the war in Ukraine, and Bidenomics in general, set in motion the biggest wave of inflation in over 30 years.
Income and Wage Change
DPI rose from 116.4 pre-pandemic to 143.5 in November of 2023. That’s an increase of 27.1 percent.
Real DPI rose from 110.7 pre-pandemic to 117.7 in November of 2023. That’s an increase of 27.1 percent. That’s an increase of 6.3 percent. But much of that income increase is in the form of interest income, dividends, and rent. The average joe does not have much interest income or dividends. The average Joe does not collect rent. The average Joe pays rent.
Average hourly earnings for production and nonsupervisory workers rose from 110.2 to 134.3. That’s an increase of 21.9 percent. But as the next line show, that big boost in wages did not buy much.
Real average hourly earnings rose from 101.7 to 103.5. That’s an increase of 1.8 percent. But all of it came early. Hourly earnings rose in the recession because the lowest paid workers were the first to lose their jobs.
The index of real hourly wages peaked at 106.1 in the recession, declined a bit, then hit 106.1 again in December of 2021.
In the last two years (minus a month), real hourly earnings are down by 2.5 percent.
Rent Jumps Another 0.5 Percent
CPI month-over-month data from the BLS, chart by Mish
Rent of primary residence, the cost that best equates to the rent people pay, jumped another 0.5 percent in November.
Rent, which is sticky, rose at least 0.4 percent for the 28th consecutive month.
For discussion, please see Rent Jumps Another 0.5 Percent, Only a Decline in Gasoline Prevents a Hot CPI
The average Joe does not collect rental income. The average Joe pays rent, up at least 0.4 percent for 28 months.
Although wages are up 21.9 percent in nominal terms, real wages are down 2.5 percent in the last two years.
Free money to Israel and Ukraine does not help. And neither does the border.
