On Employment and Real Estate Recovery

A regular commentator on BoomBustBlog has been attempting to make the case for a housing recovery based upon rising employment metrics. One of his primary arguments was rising hourly earnings. I thought I would take this time to point out that average hourly earnings can rise due to the fact that less people are working. The aggregate employment in the US has literally fell off of a cliff. Since you know that I love pictures, let’s do this graphically…

Below you have a chart of total hours worked in the US with the average hourly earnings superimposed on top. As you can see, two and a half years and trillions of dollars of stimulus and QE later, we have barely budged. There was no multiplier effect. In essence, what you had was a divisor effect, and the money would have shown up more on a dollar for dollar basis if it was simply given to the populace! Of course, that wouldn’t have kicked the inevitably deflation of the banking system down the road, now would it have?

Notice that despite the severe drop in total hours worked, average hourly earnings have increased. This can easily mislead someone who is not paying attention. Read more on this topic here:

 

and on the real estate issue…

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