There is a deep, deep disconnect between how the political leaders, chattering classes and traditional media view what is happening in the economy versus how the rest of the people feel the economy in their everyday lives. This has been true for quite a long time. But, it is even more true today, at the depths of one of the greatest financial crises in generations. Here is one question to ask: can a "recovery" be "wage-less"?
The answer is, in my view, an absolute NO. It would seem obvious to most normal people that an economy is not some abstract thing. It's made up of a lot of actual people. An economy that does not serve the interests of the people cannot be seen as functioning.
You may say, "well, duh, that's obvious". Well, yes, duh--BUT:
Over time, "recovery" and "economic health" does not always equal "people doing well"--at least if you are not in the top one percent of income earners.
Part of the problem has been that damn Gross Domestic Product--you know, GDP goes up and, whoopee, we're all supposed to celebrate. For a long time, I, and others, have pointed out that GDP is a very poor measure of the overall economic security felt by the people. GDP just tells you that stuff is being made and that dollars are running through a cash register--even disaster like Hurricane Katrina helps the GDP because of all the activity around rebuilding peoples' lives, even if tens of thousands of people actually saw their personal economic security devastated, perhaps, for the rest of their lives.
I thought again about this topic today because of a short piece in The Wall Street Journal:
Average hourly earnings were flat in March for the fourth time in five months. Their 1% annualized growth during that period is the weakest such stretch in 25 years, according to Gluskin Sheff Chief Economist David Rosenberg. The U.S., he says, is experiencing not a jobless but a "wage-less" recovery. And that's likely to continue while the unemployment rate, which came in at 8.8% in March, remains high.[emphasis added]
This is not particularly new, if you look back over the past 30 years. Wages have essentially been flat--even though productivity has been very strong over that period. Productivity, so we were once told, means higher wages--people making more stuff in less time get rewarded with higher wages.
Not anymore. Those productivity gains have flowed into the hands of the few.
This is, of course, a political game, which will only increase over the next two years. The president, in need of "good news" on the economy in order to win a second term, will be using every opportunity to describe any decline in the official employment rate, or any rise in the dumb GDP, as a sign that we are in "recovery".
But, this is a cruel hoax. There is no meaning to "recovery" until real people see a real increase in their wages and economic security.