This Is What You Spent Your Entire Pay Raise On

There has been some muted cheering at the Fed (and the Obama administration) when as a result of numerous statewide minimum wage hikes, average hourly earnings finally started to rise in early 2016, recently hitting a 2% annual increase, even if on a weekly basis they dropped to post-recession lows as the number of hours worked actually dropped confirming the decline in US output continues.

The news is worse if one steps away from government "data" and looks at third party research. According to a recent report by Sentier Research, median income wages rose only 1.4%. As MarketWatch calculates, on the 2015 median income of $56,746, a 1.4% gain would translate to about $66 more a month, before taxes, or about $48 after tax.

Here's the problem. As we have repeatedly shown in the past, as a result of the death of the US housing dream, which has pushed the homeownership rate to record lows...

 

... and as Americans are either unable to afford a house, or the bank just won't give them the necessary mortgage, median asking rents have soared to record highs.

 

Furthermore, as we showed yesterday following the latest monthly CPI report, the cost of rent rose 3.7% compared to a year ago in March. That was the fourth straight month with such a strong gain, the highest since before the financial crisis.

 

So here's the math: across the nation, the median rent for a two-bedroom apartment is $1,300, according to Apartment List. So a 3.7% rent rise, or about $48, which means that just the official rise in asking rent prices... swallowed the entire salary "gain"of $48 in after tax dollars.

Oh and that excludes Obamacare: as the government also reported, medial bills soared, in fact in February, medical care grew at the fastest rate in more than three years.

So the next time someone wonders why US households are spending far less than expected, tell them it's because they need to live, preferably with a roof above their heads..