Economists say wages are now rising faster than the CPI. That’s not true for those who rent or wish to buy a house.
Wages vs CPI, Rent, Housing Chart Notes
- All data is quarterly, compared to the same quarter a year ago.
- Index levels for all items used to compute the percent changes are normalized to 2024-Q1=100.
- Private wages and total compensation are from the BLS employer cost release.
- CPI and rent are from the BLS CPI series, end of quarter numbers.
- Case-Shiller is the national home price series, end of quarter numbers.
Case-Shiller measures repeat sales of the same house over time, a much more accurate comparison then median or average homes prices that are not adjusted for the number of rooms, amenities, lot size or square footage.
On April 20, I commented People Who Rent Will Decide the 2024 Presidential Election
This post is another look using the 2024 Q1 quarterly numbers from the BLS Employer Costs Report released June 18.
When the June CPI data is released next month, I will update the monthly numbers. For now, consider this as confirmation of my April post but with quarterly numbers.
Key Details
- From 2012 Q2 through 2022 Q4 the cost of housing dramatically rose more than wages.
- Year-over-year housing went briefly negative by less than 0.1 percent in the second quarter of 2023. However, home prices are again rising much more rapidly than wages.
- From 2021 Q1 through 2023 Q1 the CPI rose faster than wages. Since then, wages are rising faster than the CPI which cheerleaders like to point out. But…
- From 2022 Q2 through today, rent has outpaced wages. OK, rent lags. But for 33 consecutive months, nearly three years, the cost of rent has gone up more than wages.
The CPI Is Personal
Please reflect on that subtitle, especially if you are a renter or buy your own health insurance.
The BLS weighs rent at 7.61 percent of the CPI.
Owners Equivalent Rent (OER) is 26.63 percent of the CPI. OER is the cost someone would pay if they were to rent their own home.
Since nobody pays OER, many argue the CPI is overstated.
Yeah right. Tell that to renters looking to buy a home. Those who rent are likely paying 20 to forty percent of their salary towards rent, certainly not 7.61 percent.
Those Who Rent Are Angry
Roughly 36 percent or people rent. They watch home prices soar out of sight while wages do not keep up with rent.
Yet economists tell these renters they should be happy because wages are now rising faster than the CPI. Sorry guys, wages are not rising faster than the average renter’s personal CPI.
And housing prices are not even in the CPI.
The average person likely views rising home prices as inflation. The average jackass economist tells these renters that home prices are a capital expense not a consumer expense.
Lovely. Is that supposed to make renters feel better about obvious inflation?
I’ll tell you what. It makes people angry. And it reflects in the polls.
Who Are the Renters?
In general, young people and blacks.
According to the National Association of Realtors, the homeownership rate among Black Americans is 44 percent whereas for White Americans it’s 72.7 percent.
That’s the largest Black-White homeownership rate gap in a decade.
And that is why Trump is performing up to 18 percentage points now than in 2020 vs with Blacks.
Generational Homeownership Rates
In 2020, Biden captured about 90 percent of the youth vote.
Trump is now leading Biden with young voters. The above chart explains why.
Job Openings vs Unemployment Looks Very Much Like a Recession Has Begun
Unemployment is rising and job openings have crashed. It looks recessionary. Let’s investigate with a series of pictures.
If rent and the price of houses are not enough to make a huge subset of the population unhappy, here’s an added bonus:
Job Openings vs Unemployment Looks Very Much Like a Recession Has Begun
Unless something improves dramatically and quickly, Trump rates to beat Biden in November.