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Will Local Incomes Climb or Fall in the Coming Years?

Posted on September 24, 2012September 24, 2012 by The Tim

A few of you took issue with the assertion I made in Thursday’s post:

Eventually [mortgage interest rates] will go up, but it will probably be a gradual climb, and by the time they get to 6%, incomes will also be higher.

Here are a few examples of your criticisms.

From Pegasus:

Putting your faith in liars and idiots can be hazardous to your financial health. Predicting that by the time mortgage rates get back to 6% incomes will be higher can also be. Kind of like smoking hopium.

From Kary:

Not sure I’d agree with either of those claims as being all that certain. I do agree everyone was predicting rates would go up.

From blurtman:

The higher income statement ain’t necssarily true. Especially in this age of race to the bottom, where the average Chinese wage earner and American wage earner may meet.

The trend is for falling wages, but more importantly, a falling standard of living. There is absolutely no reason why wages have to rise in an inflationary environment. Pure hokum.

Also blurtman:

Tim, I am calling you out for bullshat.

I’m surprised that stating that incomes will be higher a few years from now than they are today was such a contentious prediction. Obviously nothing is certain, but I still believe that in the most likely scenario incomes will rise over the next few years.

For some context, here’s a plot of median household incomes in King, Snohomish, and Pierce counties back through 1989, courtesy of the Washington State Office of Financial Management.

Local incomes fell during the post-housing-bubble recession… for two years. By 2011 they had already begun to head back up. After the dot-com bust incomes only fell for a year in Snohomish and Pierce, and didn’t even dip at all in King.

Unless the economy totally and completely collapses, I don’t see any reason to believe that the long-term trend of steadily increasing household incomes (~2.8% per year on average) will not continue over the next few years.

If you have a compelling, coherent case to make that incomes will turn south again, I’d love to hear it.

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Migration into Washington on the Mend
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Local Incomes: Median & Per Capita, Real & Nominal

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