Two Charts that Show Why So Many Americans Are So Angry About the Economy

Last week we got the “good news” that wages are rising. It has been a recurring story over the past several months. The headlines said that hourly wages rose by 0.3% in July on a seasonally adjusted basis. Annualized that works out to just under 3.7% on a compound basis. However, as usual, a bit of perspective is helpful.

Over the past 12 months, the average hourly wage of production and non-supervisory workers, which is most people, rose by 2.7%. Sounds decent but most of that gain came last year. Over the last 6 months, wages rose just 0.2%.

Likewise, the argument that wage growth has recently begun to outpace inflation does not hold water. Compare wage gains to CPI. Over the last year CPI rose by just 1%, but only because CPI was weak in the second half of 2015. Over the past 6 months CPI has risen by 1.9% while average earnings rose by 0.2% and we know that that inflation is understated by perhaps a full percentage point.

Over the full course of the recovery since the March 2009 bottom, CPI has risen by 13.3%, suppressed by the big fall in gasoline prices in 2014-15. Wages have risen by 15.7%. In those terms, real wages have increased by a total of 2.3% over 9 years. Woop de doo.  Even that tiny gain is suspect. If housing costs were accurately measured that apparent minuscule gain in real wages would be revealed to actually be a real decline in purchasing power. In spite of what economists say, wage gains are still not keeping pace with inflation.

.

So that’s one reason Americans are unhappy. By and large, they can’t get ahead. Then they see the stock market gain of 223% since the March 2009 low and it becomes obvious to them that the game of life is rigged. According to Gallup only 55% of US households own any stocks. Bankrate.com said the percentage was 48%. Those figures included retirement accounts. The amounts held vary, but for most American families, holding a significant amount of stocks is out of reach. The benefit of that 223% gain goes to only a few. The rest of us are barely holding on versus inflation.

Another topic that Wall Street economists point to as a sign of an improving economy is the rising employment to population ratio. It’s true that it’s rising, but what is left out is that it remains in a very deep hole.

The lesson of history is that there just are not that many full time jobs anymore, relative to the growth of population.

So is it any wonder that Americans are increasingly disaffected? Too many can’t find a good job, and too many of those who find or have jobs find themselves not getting ahead. At the same time we are constantly reminded that our wealthier compatriots who own significant amounts of stocks, are getting richer faster as the benefits of QE, ZIRP, and NIRP flow only to speculators. What’s worse is that the most aggressive and probably foolhardy of those are rewarded the most, while those with only meagre savings, or who are risk averse, get nothing in spite of working hard and sacrificing to take care of their families. Hard working people realize that economic policymakers have stacked the deck against them.

Instead of rewarding borrowing, risk free carry trades, and gambling recklessly, maybe the policymakers should give some thought to rewarding hard work and thrift. Seems like once upon a time those values worked pretty well to reward Americans while maintaining solid growth in the US economy. We might even be able to have an election between two reasonably qualified people rather than two criminals who have brilliantly mastered the art of gaming the system.

Yeah, it’s no wonder Americans are angry. Policymakers have perverted the “American way” into something our forefathers fought against–a massive skimming operation.