Monday, November 1, 2010

Personal Income Falls

U.S. personal income fell once again in September, which seemed to come as a huge shock for the legions of EMPLOYED government economists in Washington, something that is no surprise at all for the full 20% of the U.S. population that is either unemployed or struggling with part time work that does not pay all the bills.

Every segment of the U.S. population is suffering through this tepid recovery, the worst since the Great Depression.  Take, for example, recent college graduates who are looking for their first real jobs in the worst employment market since 1993.

Of course, U.S. personal income is falling.  And it will continue to fall, or rise without consequence, until the U.S. GDP growth rate exceeds 5%.  What is the current growth rate?  Last quarter it was a dismal 1.7% which is not enough to cover even new college graduates and immigrants let alone the TENS OF MILLIONS still seeking employment.

To make matters worse, the U.S. real estate market, normally an engine of GDP growth, is actually now working as a brake on it, draining away resources and retarding growth.

There will be no increases in residential rents in the United States until personal income rises and rises strongly.  Same is true about property values.  Home prices are still falling in most markets and will continue to do so until people (1) have full time jobs; (2) that are reliable; (3) their personal income is rising; and (4) they feel confident enough again to buy properties for personal use and investment.

This isn't going to happen anytime before 2013.  I have predicted this in this blog before.  And even this date is unsure given the bizarre and dangerous rumblings out of Washington.  For example, Fed Chairman Ben Bernanke is going to begin yet another $500 billion or so charge against the Fed's balance sheet this week when he starts buying bonds to "stimulate" the economy, move that even The New York Times is questioning as not the greatest idea.

Given Helicopter Ben's track record, a housing price rebound in 2014 may become optimistic.