As the U.S. median wage continues to fall, the cost of living is rising sharply:
Inflation took a bigger bite out of consumers' wallets over the last 12 months, with September marking the biggest rise in three years...
The Consumer Price Index, the government's key measure of inflation at the retail level, jumped 3.9% in September from the year before. Higher food and energy prices again were the biggest culprits, with food 4.7% more expensive than a year earlier, and energy prices jumping 19.3%.
In the last two years, incomes have dropped 7%:
Median annual household income has fallen more during the recovery than it did during the recession, according to a new study from former Census Bureau officials Gordon Green and John Code. Between December 2007 and June 2009, when the U.S. economy was in recession, incomes declined 3.2 percent. While during the recovery between June 2009 and June 2011 incomes fell 6.7 percent, the study found.
The lack of income growth may explain why for most Americans the recovery still feels like a recession. Eight in 10 Americans believe the recession is an ongoing problem, according to a recent Gallup poll. And workers don't anticipate things will pick up any time soon. Nine out of 10 Americans said they don't expect to get a raise that will be enough to compensate for the rising costs of essentials like food and fuel, according an American Pulse survey released in June.
Slow job growth is likely also exacerbating the feelings of recession and weighing on household incomes. U.S. employers added 103,000 jobs in September, too few jobs drive the unemployment rate below 9.1 percent and barely enough to keep pace with population growth, the Department of Labor reported last week. Those Americans that are employed are continuing to get squeezed by their employers. Profits per employee went up for the second year in a row in 2010, according to financial analysis company Sageworks.
Whereas the Right blames the Federal Reserve for cost of living increases and the Left cites Wall Street as the cause of high unemployment, few make the connection that the big banks (a.k.a. “Wall Street”) literally own the Federal Reserve. Therefore, the fallacy that the FED's dual mandate is paid anything other than lip service is highlighted by the fact that it makes no attempt to drive down expenses, which would restore the purchasing power of households, and lower unemployment.
What the Fed doesn't understand is that full employment can exist in perfect harmony with stable prices. That's because having more people producing goods and services can never by itself lead to an environment of rising aggregate prices. And, most importantly, an increasing rate of inflation actually increases the rate of unemployment. Not only do these facts make sense economically but also are borne out in the historical data.
Each and every time the Fed has increased the money supply and sent prices rising the rate of unemployment has risen, not decreased. The simple reason for this is that inflation diminishes the purchasing power of most consumers. Falling real wages means less discretionary purchases can be made. Falling demand leads to increased layoffs and the unemployment rises as economic growth falters.
The 12.2% year-over-year rise in the consumer price index that occurred in November of 1974 led to the cyclical high of 9% unemployment during May of 1975. Likewise, in 1979 the year-over-year increase in CPI reached a high of 14.6% in March and April of 1980, which was followed by another cyclical high of 10.8% unemployment print in November and December of 1982. Once again, year-over-year CPI increased from 1.2% in December 1986 to 6.4% in October of 1990. That again corresponded with the rise in unemployment that occurred from the 5% level in March of 1989 to 7.8% in June of 1992.