The stock market index more than doubled in three years, so why do Americans feel so poor? The working class has seen the median wage drop nearly 8%:
According to a newly released report from Sentier Research, median household income was $50,020 in January, 7.8 percent less than it was when the economic downturn began in December 2007 and 5.4 percent less than it was when the recovery began in June 2009.
Yet more people are finding work. January’s unemployment rate is at its lowest since early 2009, according to the Bureau of Labor Statistics.
What's going on? First, wages have stagnated over the last several decades -- a slow but steady drag on paychecks, heightened by wide layoffs of the recession. Second, the types of jobs created these days just aren't that high-paying. During the economic downturn, 40 percent of the jobs lost came from high-wage industries -- but high-wage industries accounted for only 14 percent of the new positions created in the first year of post-downturn job growth. This trend has continued.
One measure of the people's loss of purchasing power is the combined inflation and unemployment rates, known as the misery index:'
People are holding down several jobs when they can find them and are pinching pennies to pay for gasoline that is bumping against $4.00 a gallon. Food prices are rising. This isn't exactly the best of times and the worst of times by a long shot, but there does seem to be more than enough misery to go around. This is all the more reason to dust off economist Arthur Okun's "Misery Index" and see what it may be telling us.
Arthur Okun invented his "Misery Index" in the 1970s when inflation was headed to the heavens along with unemployment. He added these two together—the unemployment rate and the inflation rate—and generated a new compact measure to look at the health of the economy.
Okun's index spoke to two very serious questions. Are my job prospects improving? And if I have a job, what's happening to the purchasing power of my money?
Another metric which unmasks the true current standard of living is the employment ratio taken against the total population. If those who dropped out of the workforce were included, the official unemployment rate would be 11%:
Up until a few weeks ago, that wonky statistic -- the ratio of people actively in the labor force divided by the total population -- was consigned to Commerce Department press releases and grad school symposiums.
But recently this ratio has found an audience because it has fallen near 29-year lows -- to 63.9 from 67.3 in 2000 -- and could bedevil the downward momentum on the unemployment rate if it starts going back up again.
The conventional logic on the topic states that the drop in labor force participation is the result of unemployed people who have given up looking for jobs - the so-called "discouraged workers." But as the economy improves, so the argument goes, those people will begin to look for work again and the unemployment rate will rise even as jobs are being created.
So we've lost 4.5 million jobs. Those that remain pay less and the cost of living has gone up more than 50%. Working people can't afford the rent as the poverty rate reaches a thirty year high.