by Calculated Risk on 1/15/2010 08:33:00 AM

From the BLS report on the Consumer Price Index this morning:

On a seasonally adjusted basis, the December Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent ... the indexes for rent and owners' equivalent rent were unchanged ...

The index for all items less food and energy rose 0.1 percent in December after being unchanged in November.

Owners' equivalent rent (OER) declined slightly in December, and has decreased at about a 1% annualized rate since peaking four months ago. OER is important because it is the largest component of CPI.

Based on reports of falling rents - and a record high apartment vacancy rate, OER will probably decline fall for some time, keeping core CPI low and possibly negative next year. Also - falling rents will push up the price-to-rent ratio, and put additional pressure on house prices.

The BLS also reported on declining real earnings in 2009:

Real average hourly earnings did not change from November to December ... Real average hourly earnings fell 1.3 percent, seasonally adjusted, from December 2008 to December 2009. A 0.3 percent decline in average weekly hours combined with the decrease in real average hourly earnings resulted in a 1.6 percent decrease in real average weekly earnings during this period.