In Germany, our public TV 8 pm news show always ends with reading out the German equivalent to the Dow Jones, and sometimes gives one or two "explanations" on why it changed, like "the DAX closed 0,6% down today. Experts consider this a consequence of tumultuous oil prices". It does this more than 2 hours after the stock market has closed, so this procedure has only one purpose: send grandpa Joe to bed with a good vibe. "Hmm, the DAX is up, that's probably good (for me)".
This is precisely how I feel about the GDP. I am not gross, I am barely domestic and I don't make products. This has nothing do with me. My wage hasn't increased in 6 years, and wages have uncoupled from productivity 50 years ago.
Real wages are a much better attempt at trying to approximate how I am actually affected by the economy, but it irks me to see that even top economists consider it appropriate to use line graphs here. Why are you lacking the ambition to work with distributions here? The real problems are always in the top and bottom percentiles. To put it vulgarly, starving single mothers don't average out.
I am sick and tired of these line graphs, it's like trying to figure out how a football match went by listening to the noise-levels from outside the stadium. Yeah, you will probably notice all the goals and maybe even figure out which team won, but coaching a team solely based in this information? Good luck.
Give distributions or nothing please. We have the data, and economists are both smart enough to work with them, and to properly explain them to their audience. Well, maybe not to the bottom 10%, but those guys will average out.
And it's what you'd expect. A lot of wage growth has been captured by the top. A line graph (pardon!) way to express this is the rising ratio of the average wage/median wage. Bill Gates walks into a bar and suddenly everyone in the bar is on average wealthier.
The other factor is the unwinding of the Covid era relief programs. I wrote a post about that.
Well, knock me over with the feather! Real wages are what really matter?! I'll be damned!
You mean when my social security check Remains the Same or grows only a few percentage points and the price of gas goes up like it suddenly did and at the same time I go to the grocery store and broccoli and apples are way up and landlords are jumping on the opportunity to raise rents and blame it on bidenomics that I get negative about the economy? A 15% drop in real wages has the same effect on my mood as if prices stay the same in the boss cut my wages by 15%.
Meanwhile we have a party that refuses to lay any plans on the table because Mitch is afraid that people will pick them apart but they have a lot to say about what actually happened under a democratic Administration. Mitch, the purpose of laying those plans on the table is so that we can take advantage of the first amendments provisions and talk about it. Talk about what's happening talk about how it feels talk about what we might be able to do about it.
I'm sure it's a lot more fun to talk at the top of our lungs about hunter's laptop and culture wars than to calmly and rationally discuss real issues, like immigration policies, climate change, preparing for another pandemic, social justice and equal opportunities for women and minorities.
Hopefully a time will come when we can realize that a culture is only as useful as the environment it is trying to adapt to and Nostalgia is not a policy and the fifties are over. Let's take advantage of our diversity and get as many perspectives as possible on all our problems, because that's the only way we're going to solve them. And the biggest problem of all right now is a threat of an authoritarian government taking over and sidelining all those voices and turning it all over to one person who's main Talent is marketing when we are a nation of immigrants with their new ideas and new energy and appear to love America more before they ever get here and some people who are born here and don't realize that democracy is how we got here.
I agree with you about the need to push real forward looking policies, but Democrats have been in control a lot of the past 15 years and we are stuck with this system, so you can't only blame one party.
Hopefully we can soon shuttle who really won the 2020 election and the oversight committee in the house can finish taking revenge on all the Democrats who said something mean about Agent Orange and then we can turn our attention to those and many other issues
. I seem to be getting snarky at 3:30 a.m. so I think I better drop the mic. Ouch! It landed on my foot. ..
I'm not a Republican supporter, probably pretty close to you on 'ideal world views'. I'm just saying look at the states that are overwhelmingly blue and they seem to have the worst inequality, just with feel good posters in their windows. Elected politicians aren't willing to fix exploitative healthcare billing or NIMBYism in the states they overwhelmingly control, why do you think if suddenly these politicians had all of the power in the country things would improve? Politicians on both sides are 90% controlled by money interests. Identity and culture war battles aren't helping economic policy.
I think you have cause and effect the wrong way round there. Those places don't have worse inequality because they vote blue, people vote blue there because there is an inequality problem they want politicians to fix.
I'm not saying that's the blues caused the inequality. And I'm differentiating between voters and politicians. I do think you are right about people voting blue because they want to solve inequality. I'm just saying on the coasts in some cities and states, the politicians are not solving the problems despite having as close to absolute power as it's gonna get in the US. I'm not saying that the solution is to vote for the other party. I'm just saying that maybe the blues either don't have or don't fight for the solutions to the problems either.
Strangely I valued and agreed quite a lot! on your first and the last paragraphs Pete Obermeir, while what was in between those (and your following comments so far) come as filled with opinions and sentiments that I daily see from people in complete opposition with your remarks on said paragraphs! (and contraire to my own opinions as well).
We are a varied and mixed population, indeed. However the sentiment expressed in those middle lines come to me as quite an integral part of certain culture lines... I´d venture to say; generations and more so, quite attuned to those who side in US politics close to your revealed choices.
Sentiments might become relevant since such layer might very well be part of what this post was precisely about; "vibecession".
Really interesting piece. I don’t think the real wage decrease since 2020 is the full picture though. I believe that the economic pessimism is largely driven by the realization of the state of affairs we find ourselves in regarding the cost of living far outpacing those real wages trending up over the past decades - take housing costs as a percentage of income. From 11.8% in 1980 to something like 45% in 2023. Healthcare in the US is unbelievably expensive compared to years gone by. Everything just costs more.
Hard to be optimistic when you wonder when the merry-go-round will stop.
Homo economist would say if people are upset they haven’t gotten a raise then they should get a new job. The labor market has rarely if ever been tighter. But that’s not how people work.
My thought also. Our expenses have gone up around 20% and our earnings have been stagnant. We were lucky in that we were saving a good bit, so we are still able to save some, but it's still pretty discouraging to see what it has done to our projected retirement savings. It'd be much, much worse if we went from saving 15-20% to going into debt or treading water.
How does it take an entire post to "reason" into the fact that people are pessimistic because they accurately perceive that people are doing worse on average. I am surprised that the assessment of individual circumstances is that positive.
With social media, I don't think we'll ever really be happy until we evolve ourselves some sort of defense mechanisms against negativity, polarization, dunking, clickbait, etc.
Well said. That is one reason why I never established any social media accounts (there are others- including my unwillingness to feel obligated to “like” other people’s photos and quotidian activities and my realization that nobody really cares about mine, either). I have also avoided cable news shows of any stripe for about 15 years - they have the same business model as social media: agita’, reciprocal grooming and “othering”. Who needs it? The best defense is not to participate.
I remember about the situation in Turkey in the recent 2 years: although the Turkish GDP and GDP per capita still grew quite rapidly: https://www.reuters.com/markets/turkeys-economy-grew-56-2022-pace-slow-after-earthquakes-2023-02-28/, the common people in Turkey was still grumpy about the economy due to rapid inflation (peaked in over 180% as in unofficial data). However, I think the Turkish GDP growth here is really unsustainable due to negative real interest rates, and the really surprised thing is that even though Turkish people are grumpy with falling real wages, they still elected Erdogan as President :)))
The fact is, everyone and everything is running out of money. Businesses are collapsing, universities are going into a budget crisis, restaurant prices are going crazy, a room at a Motel 6 is $250, and no one's paycheck has gone up since 2019. It's that simple.
There's not enough recent data to go by. I'm talking about normal people, not "Rolls Royce buyers". The 1% don't matter for this issue. My evidence is not "one person" but everyone I know and every institution I'm associated with. Everyone I do business with, every business I patronize, every place I work for, every friend I have, every family member. Everyone is complaining about running out of money, every institution is tightening their expenditures, some have actually closed down or gone bankrupt or been absorbed because of financial problems.
"it’s often very hard to figure out which economic numbers people actually care about"
Most people don't care that much about any economic numbers. That's just the declining marginal utility of wealth in action. Beyond level 1 and part of level 2 (security) the rest of Maslow's hierarchy of needs is unpurchaseable at any price and therefore outside the realm of economics. Economists struggle to accept that this sets a boundary to their field.
I hope you're correct about wages. However, blue collar wages have been largely flat for a very long time:
Most ex-coal miners can't learn to code. The reality is that most Americans aren't part of (and will not become part of) the laptop / knowledge-worker class. So until we figure out how to bring up the wages of lower 50% of our population, I predict the wagecession (I like that term) will persist.
Follow-up question - what has happened to blue-collar productivity? Obviously these guys deserve a wage rise regardless of what has happened to their productivity, but the answer to that question affects how to solve the problem.
One answer might be to have securities (a company's stock or debt) available to all employees, either at a discounted rate from the market rate or a share of stock given in addition with pay, like 1 share for 1 month (~160 hours) of work.
There's something truly fantastic about wondering why people feel the economy's doing poorly - to the point where it causes actual frustration in the wonderer(s) - and then, after carefully investigating myriad possibilities, cautiously and unsteadily hypothesizing that "maybe, possibly, it might have something vaguely to do with the fact that they're getting paid less for more work, but we can't really say for sure".
Isn’t the 15% inflation you mentioned over the last 30 months built into the GDP statistics? If so, then the quarterly numbers may be increasing (so no technical recession), but buying power keeps dropping - that’s exciting news!
The US is also north of $30 trillion in debt with no end to the increase in sight. The man on the street is smart enough to know that is not sustainable.
Might they also worry that the new jobs that exist are outside their skill set?
Throw in the fact that we sit on vast amounts of oil and gas but choose to shut down our production, idle more workers, send those jobs to other countries and pay higher prices for our energy - I can hardly contain my glee.
I’m not sure if the reality of AI has been digested by the man on the street, but many people will feel even more uneasy about their employment opportunities once it does.
When we look at the increase in the S&P 500 we are happy that it is increasing. But maybe we’re forgetting that the makeup of those 500 companies changes over time. The net profit of the biggest companies may be increasing, but it’s possible that increase is benefiting a smaller group of people.
What is puzzling: many so called experts say real wages haven’t increased much since 1970s: yet year after year 16 million middle class vehicles and millions of middle class houses are bought.. how can that be?
Credit for 45 years?? Middle class people still have to make monthly payments... even if rates were zero... and the woman-working 2nd income factor was fully accounted for by 1990. The obvious answer that ..as usual the government is wrong ..and people’s incomes are increasing steadily
The inflation-adjusted personal consumption expenditures per household has been on a steady upward trend since 1955, (with a big but very short covid dip). This goes against the common narrative that US standard of living has been stagnating (with the caution that this is a mean rather than median measure.)
The share of a income going to housing is also increasing. If I have to pay more for my house but my real wages are stagnating or even slightly growing, my standard of living will decrease.
A different comment cited that the share of income going to housing has gone from 11.8% in 1980 to 45% today. That’s a huge chunk that used to be spent on other things but is now spent on housing.
Ordinary people have never really recovered from the 2008 recession. Taking inflation into account we've lost money most years - It personally took me several moves and 8 years to get my hourly rate back to its pre "Once in a lifetime financial crisis" levels.
My question is, do those real wages actually represent a wage index, comparing wage in a given job to the wage in the same job in the previous period unaffected by shifts in the composition of jobs? And to the extent it is about real wages properly measured, why would that produce the gap between reports of feelings about personal and national outcomes?
I put some weight on the constant harping on "inflation is STILL above the Fed's target," which is OK except where was that harping back in 2008-2020 when inflation was mostly _below_ target?
Plus for the vast majority of people with jobs, the fall in unemployment hardly registers, but inflation counts in full, not just the part that exceeds nominal wage increases.
As for the end of the vibecession, I am more worried about TIPS having fallen and remaining below the Fed's target. [Hey, as an economic "influencer," could you please get the Treasury to issue some intermediate tenor TIPS. The 5-and 10-year TIPS are nice but why not a 1-, 2-,and 3-year TIPS?. Thank you. :)]
A trendline of mean earnings doesn't actually tell you what's happening to individual workers, especially over short timeframes.
We might also be seeing a lot of retirees driving down the numbers, for boomers who were near their peak incomes but then dropped to a low income in retirement. That would produce the drop in the mean, no?
There are rafts of article on the "middle class has not gotten a raise in 20 years" theme, and I don't think that gently upward sloping line from FRED refutes them all.
An exhaustive review of the subject and the current explanations about it, as usual. Together with that - real wages - central piece of evidence that would be the elephant in the room if missed. And it is lacking in the media so far.
What I am still missing is a more "financial" way to measure and value discontent, which after the continuous landslide of economy impacting events these years might have become more central to the population at large. More so with the increased divergence between what is public and what is published (by the way of saying of Spain's ex-president Felipe Gonzalez) and the grown importance of medias of all kinds in our lives (you accounted for this last possible causation).
Hence, if our projected income is on the verge of large and sequential collapses; be them catastrophes affecting agriculture, oil, etc prices. Or the quality of the air or our own sense of security if temperatures, climate suffer sudden changes or get to extremes and inundations, fires, etc. start to sprout not so far from our cities.
All factors that also effect present, relevant decisions like family planning and I am far from being thorough in this. Just the opposite; trying to be all encompassing. For instance, what are the economic perception effects of having a stuck real state market in this situation? The marginal prices reflect a small % of sellers and buyers, while the "not selling" and the "not buying" large majorities comprise both those postponing decisions... and the planning of those contemplating doing so in the next 5, 10 plus years.
Plus, I don't know the US data, but in my country people living in debt has increased dramatically in the past decade. Sharp interest rates increase become a dire cause of impoverishment right there.
To further the last point, after 20 years of low interest rates, its sharp increase together with real state historically high prices steadily increasing, actually means that buying a house is postponed by all those groups who were considering such future decision, be it 1, 2 5 or more years down the line.
The hardships of a renting present gets extended on our projected lives, probably together with the present realization that said property has suddenly grown smaller, farther, more expensive.
In Germany, our public TV 8 pm news show always ends with reading out the German equivalent to the Dow Jones, and sometimes gives one or two "explanations" on why it changed, like "the DAX closed 0,6% down today. Experts consider this a consequence of tumultuous oil prices". It does this more than 2 hours after the stock market has closed, so this procedure has only one purpose: send grandpa Joe to bed with a good vibe. "Hmm, the DAX is up, that's probably good (for me)".
This is precisely how I feel about the GDP. I am not gross, I am barely domestic and I don't make products. This has nothing do with me. My wage hasn't increased in 6 years, and wages have uncoupled from productivity 50 years ago.
Real wages are a much better attempt at trying to approximate how I am actually affected by the economy, but it irks me to see that even top economists consider it appropriate to use line graphs here. Why are you lacking the ambition to work with distributions here? The real problems are always in the top and bottom percentiles. To put it vulgarly, starving single mothers don't average out.
I am sick and tired of these line graphs, it's like trying to figure out how a football match went by listening to the noise-levels from outside the stadium. Yeah, you will probably notice all the goals and maybe even figure out which team won, but coaching a team solely based in this information? Good luck.
Give distributions or nothing please. We have the data, and economists are both smart enough to work with them, and to properly explain them to their audience. Well, maybe not to the bottom 10%, but those guys will average out.
I had the same thought. Here is a post from Brad De Long that does look at distributions:
https://mail.google.com/mail/u/0/#search/grasping+reality/WhctKKXxCwzVqPqzsBfDJNMRjWDnhthhvKgJtjjpmxrmvWmdBdGvfLFqZcmkjgPBGGpQKqv
And it's what you'd expect. A lot of wage growth has been captured by the top. A line graph (pardon!) way to express this is the rising ratio of the average wage/median wage. Bill Gates walks into a bar and suddenly everyone in the bar is on average wealthier.
The other factor is the unwinding of the Covid era relief programs. I wrote a post about that.
https://robertsdavidn.substack.com/p/the-ongoing-financial-constriction
Hi David,
You copied a link from your e-mail so it won't work for people. Would you mind sharing the link to the substack post? Thanks
Here it is.
https://open.substack.com/pub/braddelong/p/american-upper-middle-class-existence?r=i1fv&utm_campaign=post&utm_medium=email
many thanks!
Income inequality has been flat in the US since 2014 and decreasing since 2019.
("Real wages are decreasing" would reduce inequality by itself, but even past that the low end of real wages in the US are growing.)
Isn't that just because of how expensive employer healthcare benefits are? You need to look at "total compensation" not wages.
Also when I say a problem hasn't gotten worse in ten years it's silly to complain it ever started happening in the first place.
Well, knock me over with the feather! Real wages are what really matter?! I'll be damned!
You mean when my social security check Remains the Same or grows only a few percentage points and the price of gas goes up like it suddenly did and at the same time I go to the grocery store and broccoli and apples are way up and landlords are jumping on the opportunity to raise rents and blame it on bidenomics that I get negative about the economy? A 15% drop in real wages has the same effect on my mood as if prices stay the same in the boss cut my wages by 15%.
Meanwhile we have a party that refuses to lay any plans on the table because Mitch is afraid that people will pick them apart but they have a lot to say about what actually happened under a democratic Administration. Mitch, the purpose of laying those plans on the table is so that we can take advantage of the first amendments provisions and talk about it. Talk about what's happening talk about how it feels talk about what we might be able to do about it.
I'm sure it's a lot more fun to talk at the top of our lungs about hunter's laptop and culture wars than to calmly and rationally discuss real issues, like immigration policies, climate change, preparing for another pandemic, social justice and equal opportunities for women and minorities.
Hopefully a time will come when we can realize that a culture is only as useful as the environment it is trying to adapt to and Nostalgia is not a policy and the fifties are over. Let's take advantage of our diversity and get as many perspectives as possible on all our problems, because that's the only way we're going to solve them. And the biggest problem of all right now is a threat of an authoritarian government taking over and sidelining all those voices and turning it all over to one person who's main Talent is marketing when we are a nation of immigrants with their new ideas and new energy and appear to love America more before they ever get here and some people who are born here and don't realize that democracy is how we got here.
I agree with you about the need to push real forward looking policies, but Democrats have been in control a lot of the past 15 years and we are stuck with this system, so you can't only blame one party.
Hopefully we can soon shuttle who really won the 2020 election and the oversight committee in the house can finish taking revenge on all the Democrats who said something mean about Agent Orange and then we can turn our attention to those and many other issues
. I seem to be getting snarky at 3:30 a.m. so I think I better drop the mic. Ouch! It landed on my foot. ..
I'm not a Republican supporter, probably pretty close to you on 'ideal world views'. I'm just saying look at the states that are overwhelmingly blue and they seem to have the worst inequality, just with feel good posters in their windows. Elected politicians aren't willing to fix exploitative healthcare billing or NIMBYism in the states they overwhelmingly control, why do you think if suddenly these politicians had all of the power in the country things would improve? Politicians on both sides are 90% controlled by money interests. Identity and culture war battles aren't helping economic policy.
I think you have cause and effect the wrong way round there. Those places don't have worse inequality because they vote blue, people vote blue there because there is an inequality problem they want politicians to fix.
I'm not saying that's the blues caused the inequality. And I'm differentiating between voters and politicians. I do think you are right about people voting blue because they want to solve inequality. I'm just saying on the coasts in some cities and states, the politicians are not solving the problems despite having as close to absolute power as it's gonna get in the US. I'm not saying that the solution is to vote for the other party. I'm just saying that maybe the blues either don't have or don't fight for the solutions to the problems either.
Martha vineyard and atherton are exhibit 1a of not here you peasants. I am sure those places voted 90%+ D.
The people who live in Martha's Vineyard aren't rich, it's the visitors who are. They are D voters since it's Massachusetts.
They’re die hard Liberals (Leftists), and live in a huge bubble.
“It’s a big club, and you ain’t in it!” - George Carlin
You actually have to wonder WHO won the 2020 election? C’mon!
Social security recipients, being indexed to CPI, are doing better than wage earners, who must ultimately rely on productivity and competitiveness.
Strangely I valued and agreed quite a lot! on your first and the last paragraphs Pete Obermeir, while what was in between those (and your following comments so far) come as filled with opinions and sentiments that I daily see from people in complete opposition with your remarks on said paragraphs! (and contraire to my own opinions as well).
We are a varied and mixed population, indeed. However the sentiment expressed in those middle lines come to me as quite an integral part of certain culture lines... I´d venture to say; generations and more so, quite attuned to those who side in US politics close to your revealed choices.
Sentiments might become relevant since such layer might very well be part of what this post was precisely about; "vibecession".
Really interesting piece. I don’t think the real wage decrease since 2020 is the full picture though. I believe that the economic pessimism is largely driven by the realization of the state of affairs we find ourselves in regarding the cost of living far outpacing those real wages trending up over the past decades - take housing costs as a percentage of income. From 11.8% in 1980 to something like 45% in 2023. Healthcare in the US is unbelievably expensive compared to years gone by. Everything just costs more.
Hard to be optimistic when you wonder when the merry-go-round will stop.
This is exactly how many I know feel. The cost of having shelter and insurance are truly out of control in many areas.
Insurance is the killer, we have about $150K family income and pay $12,500 per year on insurance, I don't see how that is sustainable.
Here’s what I don’t get: Why weren’t real wages the first thing folks looked at for an explanation for economic pessimism??
Even more baffling - how can economists believe that a society where people are getting poorer as having a "strong economy"?
Homo economist would say if people are upset they haven’t gotten a raise then they should get a new job. The labor market has rarely if ever been tighter. But that’s not how people work.
My thought also. Our expenses have gone up around 20% and our earnings have been stagnant. We were lucky in that we were saving a good bit, so we are still able to save some, but it's still pretty discouraging to see what it has done to our projected retirement savings. It'd be much, much worse if we went from saving 15-20% to going into debt or treading water.
How does it take an entire post to "reason" into the fact that people are pessimistic because they accurately perceive that people are doing worse on average. I am surprised that the assessment of individual circumstances is that positive.
Indeed.
Because when you're an intellectual, the most obvious explanation is always the last thing you look for.
With social media, I don't think we'll ever really be happy until we evolve ourselves some sort of defense mechanisms against negativity, polarization, dunking, clickbait, etc.
Well said. That is one reason why I never established any social media accounts (there are others- including my unwillingness to feel obligated to “like” other people’s photos and quotidian activities and my realization that nobody really cares about mine, either). I have also avoided cable news shows of any stripe for about 15 years - they have the same business model as social media: agita’, reciprocal grooming and “othering”. Who needs it? The best defense is not to participate.
That's a very interesting point of view Noah!
I remember about the situation in Turkey in the recent 2 years: although the Turkish GDP and GDP per capita still grew quite rapidly: https://www.reuters.com/markets/turkeys-economy-grew-56-2022-pace-slow-after-earthquakes-2023-02-28/, the common people in Turkey was still grumpy about the economy due to rapid inflation (peaked in over 180% as in unofficial data). However, I think the Turkish GDP growth here is really unsustainable due to negative real interest rates, and the really surprised thing is that even though Turkish people are grumpy with falling real wages, they still elected Erdogan as President :)))
The fact is, everyone and everything is running out of money. Businesses are collapsing, universities are going into a budget crisis, restaurant prices are going crazy, a room at a Motel 6 is $250, and no one's paycheck has gone up since 2019. It's that simple.
Tell us about one entity or person who is richer today and is spending more money.
Corporations report that spending on wages increased 10% last year.
There's not enough recent data to go by. I'm talking about normal people, not "Rolls Royce buyers". The 1% don't matter for this issue. My evidence is not "one person" but everyone I know and every institution I'm associated with. Everyone I do business with, every business I patronize, every place I work for, every friend I have, every family member. Everyone is complaining about running out of money, every institution is tightening their expenditures, some have actually closed down or gone bankrupt or been absorbed because of financial problems.
"it’s often very hard to figure out which economic numbers people actually care about"
Most people don't care that much about any economic numbers. That's just the declining marginal utility of wealth in action. Beyond level 1 and part of level 2 (security) the rest of Maslow's hierarchy of needs is unpurchaseable at any price and therefore outside the realm of economics. Economists struggle to accept that this sets a boundary to their field.
I hope you're correct about wages. However, blue collar wages have been largely flat for a very long time:
https://nces.ed.gov/programs/coe/indicator/cba
https://crsreports.congress.gov/product/pdf/R/R45090/13
Most ex-coal miners can't learn to code. The reality is that most Americans aren't part of (and will not become part of) the laptop / knowledge-worker class. So until we figure out how to bring up the wages of lower 50% of our population, I predict the wagecession (I like that term) will persist.
Follow-up question - what has happened to blue-collar productivity? Obviously these guys deserve a wage rise regardless of what has happened to their productivity, but the answer to that question affects how to solve the problem.
One answer might be to have securities (a company's stock or debt) available to all employees, either at a discounted rate from the market rate or a share of stock given in addition with pay, like 1 share for 1 month (~160 hours) of work.
There's something truly fantastic about wondering why people feel the economy's doing poorly - to the point where it causes actual frustration in the wonderer(s) - and then, after carefully investigating myriad possibilities, cautiously and unsteadily hypothesizing that "maybe, possibly, it might have something vaguely to do with the fact that they're getting paid less for more work, but we can't really say for sure".
Isn’t the 15% inflation you mentioned over the last 30 months built into the GDP statistics? If so, then the quarterly numbers may be increasing (so no technical recession), but buying power keeps dropping - that’s exciting news!
The US is also north of $30 trillion in debt with no end to the increase in sight. The man on the street is smart enough to know that is not sustainable.
Might they also worry that the new jobs that exist are outside their skill set?
Throw in the fact that we sit on vast amounts of oil and gas but choose to shut down our production, idle more workers, send those jobs to other countries and pay higher prices for our energy - I can hardly contain my glee.
I’m not sure if the reality of AI has been digested by the man on the street, but many people will feel even more uneasy about their employment opportunities once it does.
When we look at the increase in the S&P 500 we are happy that it is increasing. But maybe we’re forgetting that the makeup of those 500 companies changes over time. The net profit of the biggest companies may be increasing, but it’s possible that increase is benefiting a smaller group of people.
Pfizer comes to mind.
Excellent article.. thanks!
What is puzzling: many so called experts say real wages haven’t increased much since 1970s: yet year after year 16 million middle class vehicles and millions of middle class houses are bought.. how can that be?
Credit
Credit for 45 years?? Middle class people still have to make monthly payments... even if rates were zero... and the woman-working 2nd income factor was fully accounted for by 1990. The obvious answer that ..as usual the government is wrong ..and people’s incomes are increasing steadily
The inflation-adjusted personal consumption expenditures per household has been on a steady upward trend since 1955, (with a big but very short covid dip). This goes against the common narrative that US standard of living has been stagnating (with the caution that this is a mean rather than median measure.)
The share of a income going to housing is also increasing. If I have to pay more for my house but my real wages are stagnating or even slightly growing, my standard of living will decrease.
A different comment cited that the share of income going to housing has gone from 11.8% in 1980 to 45% today. That’s a huge chunk that used to be spent on other things but is now spent on housing.
To quote Nabokov, "Actually he was a pessimist, and, like all pessimists, a ridiculously unobservant man."
Ordinary people have never really recovered from the 2008 recession. Taking inflation into account we've lost money most years - It personally took me several moves and 8 years to get my hourly rate back to its pre "Once in a lifetime financial crisis" levels.
I’m still paying more for milk. Remember what Truman said. “If you laid all the economists end to end they’d point in every direction.”
My question is, do those real wages actually represent a wage index, comparing wage in a given job to the wage in the same job in the previous period unaffected by shifts in the composition of jobs? And to the extent it is about real wages properly measured, why would that produce the gap between reports of feelings about personal and national outcomes?
I put some weight on the constant harping on "inflation is STILL above the Fed's target," which is OK except where was that harping back in 2008-2020 when inflation was mostly _below_ target?
Plus for the vast majority of people with jobs, the fall in unemployment hardly registers, but inflation counts in full, not just the part that exceeds nominal wage increases.
As for the end of the vibecession, I am more worried about TIPS having fallen and remaining below the Fed's target. [Hey, as an economic "influencer," could you please get the Treasury to issue some intermediate tenor TIPS. The 5-and 10-year TIPS are nice but why not a 1-, 2-,and 3-year TIPS?. Thank you. :)]
came here hoping to dig into this same point.
A trendline of mean earnings doesn't actually tell you what's happening to individual workers, especially over short timeframes.
We might also be seeing a lot of retirees driving down the numbers, for boomers who were near their peak incomes but then dropped to a low income in retirement. That would produce the drop in the mean, no?
There are rafts of article on the "middle class has not gotten a raise in 20 years" theme, and I don't think that gently upward sloping line from FRED refutes them all.
Also, the inflator for real wages includes housing costs, but those increasing (mostly) benefits you if you're a homeowner.
Similarly, if you're on social security you get inflation adjustments.
Exactly what I was suspected. So unless people are reacting to the published numbers, "real wages" if one remains employed, are not falling.
An exhaustive review of the subject and the current explanations about it, as usual. Together with that - real wages - central piece of evidence that would be the elephant in the room if missed. And it is lacking in the media so far.
What I am still missing is a more "financial" way to measure and value discontent, which after the continuous landslide of economy impacting events these years might have become more central to the population at large. More so with the increased divergence between what is public and what is published (by the way of saying of Spain's ex-president Felipe Gonzalez) and the grown importance of medias of all kinds in our lives (you accounted for this last possible causation).
Hence, if our projected income is on the verge of large and sequential collapses; be them catastrophes affecting agriculture, oil, etc prices. Or the quality of the air or our own sense of security if temperatures, climate suffer sudden changes or get to extremes and inundations, fires, etc. start to sprout not so far from our cities.
All factors that also effect present, relevant decisions like family planning and I am far from being thorough in this. Just the opposite; trying to be all encompassing. For instance, what are the economic perception effects of having a stuck real state market in this situation? The marginal prices reflect a small % of sellers and buyers, while the "not selling" and the "not buying" large majorities comprise both those postponing decisions... and the planning of those contemplating doing so in the next 5, 10 plus years.
Plus, I don't know the US data, but in my country people living in debt has increased dramatically in the past decade. Sharp interest rates increase become a dire cause of impoverishment right there.
To further the last point, after 20 years of low interest rates, its sharp increase together with real state historically high prices steadily increasing, actually means that buying a house is postponed by all those groups who were considering such future decision, be it 1, 2 5 or more years down the line.
The hardships of a renting present gets extended on our projected lives, probably together with the present realization that said property has suddenly grown smaller, farther, more expensive.