Consumers’ Wages Show Improvement
A common refrain over the last few years has been on the pitiful growth in workers’ wages. They have risen barely above inflation so that, in the end, consumers have not made any progress in their economic well-being.
In fact, as demonstrated in the chart below, the situation has not improved over the last year. For the 12 months ended in June, wages rose 2.7% — just the same as the average seen over the last two years. Moreover, and more concerning, is that so far this year wages are moving up at a slightly lower rate: 2.6%.
At the same time, prices have increased at a pace of 2.4% so far this year, just a shade below the gains in wages. So the net gain for consumers is a minimal 0.2%; nothing to write home about.
But, as one would suspect, there is a large difference in hourly wages, depending on specific field. The chart below compares current wages for many categories of employment against their growth for the first six months of this year.
The horizontal axis plots whether a specific profession’s wages are above or below the national average of $26.98 (the average hourly wage in all private businesses combined in June of this year). The vertical axis displays how much the growth rate of each job category exceeds or is below the national average of 2.6%. Thus, points on the right-hand side of the chart indicate jobs whose wages are above the national average and, similarly, points on the top of the chart indicate jobs whose wages are rising faster than the nation’s average.
We have highlighted several points in the chart. For instance, the highest wages are in professional services, averaging $41.29 in June, or nearly $15 above the average. Conversely, we can see that the lowest hourly wages are found in hospitality jobs (including hotels and restaurants) with an average hourly wage of $14.97, which is $12.01 lower than the overall average.
Single-family contractors’ hourly wage is $3.59 higher than the average wage. But residential remodelers, also highlighted in the graph, draw an hourly wage of $26.73, only slightly below the national average.
Areas where wages are rising fast are also in the construction industry in general. The fastest is workers in single-family construction that are rising 5.3 percentage points faster than the 2.6% average. Also, residential building and remodeling workers have seen fast growth in their hourly pay.
But even though workers in interior design earn $4.50 more per hour than the national average, their growth has been below average so far this year.
Mortgage Rates Edge Up
Fixed mortgage rates moved up ever so slightly last week, by just one basis point to 4.53%. This increase is barely perceptible to make an impact on the residential markets. Also, remember that current mortgage rates impact house sales several weeks later; it takes several weeks from the time the consumer applies for a mortgage loan and the documents are finally signed and the funds handed over.
Manuel Gutierrez, Consulting Economist to NKBA
Explanation of NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator with a colored triangle that highlights visually the recent trend for each of the drivers. “Green” is a positive signal, indicating that the latest value is improving; “Yellow,” as it’s commonly understood, denotes caution because the variable may be changing direction; “Red” indicates that the variable in question is declining, both in its current value and in relation to the recent past.
Note that all the data, except for “mortgage rate” and “appliance-store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.
Single-Family Starts. This is the number of single-family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.
Existing-Home Sales. These data are issued monthly by the National Association of Realtors and capture the number of existing homes that were sold in the previous month.
High-End Home Sales. This series are sales of new homes priced at $750,000 and higher. The data are released quarterly by the U.S. Department of Commerce and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.
Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building-Materials Sales. These data, released monthly by the Department of Commerce, capture total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also includes sales to projects other than residential houses.
Appliance-Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as home centers, for instance.
We hope you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.
