Economists' Outlook

Housing stats and analysis from NAR's research experts.

Economic expansion, though still sluggish, means more jobs and higher income generation. But as with many economic variables, there are distinct variations as to where the incomes are rising and not rising. The ultra-loose monetary policy has resulted in a very low interest rate environment with virtually no return on money sitting as bank deposits. The total interest income therefore has taken a big hit.

Nearly 5 million more jobs from the cyclical low point a few years ago have led to overall growth in total wage and benefit payouts to workers. But on a per worker basis, the wage growth has trailed behind consumer price inflation in recent years. The payroll tax rate will rise back to 6.2% in 2013 (from this year’s 4.2%) so the net wage growth will be muted next year. The rise in the payroll tax rate is to assure that future generations will have some semblance of social security checks once they retire.

The income from proprietor businesses has been rising, which is good news for small and mid-sized businesses that are structured as corporations. However, the lack of a steady income stream (W-2 forms) is preventing many business owners from borrowing money to expand or to get a mortgage. The graph below shows the income after inventory and capital consumption depreciation allowance, typically the stuff that only accountants are familiar with.

From corporations, there has been a solid rebound in corporate profits, thereby leading to a steadily higher dividend payout. The one-time spike in 2004 was due to the lowering of the tax rate on dividend income and Microsoft’s special one-time big dividend payout to its shareholders. Evidently, Microsoft simply had too much cash accumulating in the company’s vault. Another spike in the fourth quarter of this year is anticipated as many corporations are paying out early and larger amounts ahead of a higher dividend tax rate next year.

As the unemployment filings are coming down, total benefits as unemployment insurance has been rapidly falling, though they still remain about double pre-recession levels.

The one area where growth has shot up solidly in the past 6 years is in rental income. As the rental population increased, first as home prices became unaffordable during the late bubble years in 2006 and then from the subsequent housing market crash, the people positioned to receive rental income have done quite well.

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