Jeanna Smialek of Bloomberg reports on a topic that it describes as “depressing” – wages. Despite steady increases in hiring, Smialek notes that wages have increased at a 2% rate since the end of the “Great Recession” in 2009. She cites two other measures that have held back pay increases: low productivity and low inflation. Bloomberg focuses on how this news impacts the economy. I’m more concerned with working people and what they are paid. More people are employed every month, and consumer sentiment remains negative. That doesn’t make sense. It would seem that increased opportunities to get new jobs and change jobs should make workers happier. However, as this fine article notes, too many Americans feel that their income is not letting them get ahead. If that’s the new normal, we’re in big trouble.
Bloomberg is one of my favorite sources to learn about the economy and how it affects workers. Dan Moss, Bloomberg’s Executive Editor for Economy, has a short article on a good measure to understand how to gauge changes in hourly earnings. The Employment Cost Index (ECI) is a quarterly report from the Bureau of Labor Statistics. According to Moss, it “looks at how much employers are compensating the same position over a period of time. In other words, what is the pay of a builder, or plumber, or, God forbid, a journalist for a job over a period of time.” He says the number to watch is 2%, which is where the index has been stuck for a long time. Moss cites a forecast by Morgan Stanley that says the index will move to 2.6%, which he calls “encouraging.” I hope this is good news. In any case, it is good to have another tool to analyze what we are earning.
P.S. USA Today reported the latest ECI data, and the news was ugly. The second quarter increase was only 0.2%, "the slowest pace on record dating to the early 1980s." The article goes on to discuss how this lack of growth is odd given drops in unemployment. Employers should have to pay more to hire new employees and keep existing employees in a tight labor market. I will keep watching this topic and follow up with other news and views about how our very strange economy affects workers.
Bloomberg reports what seems to be good news. John Williams, president of the Federal Reserve's San Francisco bank, says that the job market is doing so well that the central bank might need to raise interest rates. The article cites lower unemployment rates as the reason for the Williams' statement. Unemployment has declined greatly from its peak during the Great Recession. Even so, many Americans who are counted as employed are only working part-time. Many more are working full-time, but doing so at a low wage. Even workers who make middle class incomes are struggling because they have only received minimal raises over the past 5-8 years.
It’s great to be optimistic, and the Fed should be concerned with inflation. However, most Americans do not feel secure in their jobs and incomes. According to the Consumer Confidence Index of the Conference Board, Americans are not enthusiastic about the current economy. Almost as many people (11.1%) expect their incomes to decline as the small number (17.4). These metrics also show that most American are treading water, not what should be expected in an expanding economy. Politicians and the Fed need to address that concern and not simply focus on the unemployment rate. There will only be a real recovery when Americans feel financially secure.
We love bad news. It gets the biggest font headlines, and it leads on radio and TV.
Today I found two bits of good news buried in the Chicago Sun-Times. The paper's great business report Francine Knowles reports that temporary employment is up in Chicago by nearly 50% for the last five months. This increase usually precedes increased full time hires. In the same edition, a small note said that retail inventory are being depleted, which means Americans are buying again, another factor that should lead to hiring. A couple of weeks ago another buried story was the latest Consumer Confidence Survey, which showed that American are feeling better about the economy.
These stories give me hope that summer will be a comeback time for the economy. Today I was at a street fair in my neighborhood and a book fair in downtown Chicago. People are out, and they are spending money. Rather than worry about Spain and Greece, the media should look at what's happening in Chicago.