Finally, just the kind of article I’ve been waiting to read about economic trends: “Why Does a Good Economy Not Feel That Way?”
But first, I do have a beef with the article, or at least the headline writer. In the face of so much economic bad news (as we’ll see in a moment), how is it accurate to write that a “good economy” doesn’t “feel good”? Language matters, I think, and making GDP semnatically equivalent to “the economy” is just plain misleading. Wouldn’t a better headline be: “Why Does a Bad Economy Send Mixed Signals?”
For some time now there’s been a strange de-coupling of trends: US GDP is growing, as is the stock market. But fewer and fewer Americans feel positive about the economy: 64 percent think it’s getting worse.
There are several possible explanations for this, I suppose. It could be that other bad news—war or perhaps low presidential approval ratings–are clouding Americans’ judgment. Or it could be that, as Fox Newshas suggested, the media is systematically distorting the true picture of American economic vigor.
But I think the likliest explanation is pretty simple.
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GDP and stock growth be dammed, the average American is actually getting poorer. A few tidbits from the article to illustrate my point:
…worker compensation—pay and benefits—increased in the first quarter at an annual rate of only 2.4 percent, the slowest rate in seven years.
The last figures on inflation, by the way, have it at about 3.4 percent.
“Only the elite at the upper end of the occupational hierarchy have been spared the pressures of an increasingly brutal wage compression,” said Stephen Roach, chief economist for banking giant Morgan Stanley.
In a March analysis for investors, Roach concluded that an increasingly globalized U.S. economy isn’t a rising tide that lifts all boats. Instead, “the rich are, indeed, getting richer, but the rest of the workforce is not.”
Roach’s insight in consistent with credible state by state reports of income trends. As a nation, the US is growing apart.
…two government measures of workers’ pay—median weekly earnings (the point where half of Americans make more and half make less) and a broader index that adds benefits such as health insurance to compensation—grew more slowly than inflation over the past 12 months…
In fact, the most recent data on US household median income still shows that households has been stagnant or declining for at least 5 straight years, in inflation-adjusted terms.
Suffice it to say, it doesn’t seem the least bit strange to me that Americans’ views of the economy have more to do with their household finances and less to do with macro accounting conventions like GDP. What is odd, is that reporters are still treating GDP as if it is, in fact, “the economy.”