What's Up with the Economy Feels Like Down

Just yesterday, my spouse and I were discussing how we couldn't understand all the Bush-hype about the current media-celebrated economic boom. Half the people we know are layed-off (or fearful they soon will be) and struggling mightily to find another job--any job--even if in another field and/or at much reduced pay.

Both baby boomers and recent college grads seem to be in especially bad states, the former in that should they lose their job, their age makes it doubly hard to find a new one. It's a dirty little secret that our anti-descrimination laws fail to protect most people from age descrimination in that it is often near impossible to prove. As for college grads, seemingly a large number of them are struggling to find jobs in their preferred fields and coming up empty handed. Given, none of our conversation was based on scientific numbers, just personal observation.

The point is, if the economy is doing so well, how come we ain't feeling it? We immediately chalked it up to more Bush lies--the economic numbers are probably bogus, we surmised. Bush's description of the economy IS a lie insofar as he fails to point out that while his beloved corporate profits are way up, Mr. and Mrs. American worker's paycheck is way down. Or at least it sure feels that way.

Perhaps, we thought, the discrepency has to do with the fact that the new jobs currently being created are low-paying white and blue collar jobs rather than the higher paying jobs they are replacing. What's more, how could job growth possibly be so rosy when we constantly read about plants closing and job layoffs in major companies like GM and Motorola, to name two.

Paul Krugman, in his New York Times article 'The Joyless Economy' offers a simple, factual explanation:

"[T]he main explanation for economic discontent is that it's hard to convince people that the economy is booming when they themselves have yet to see any benefits from the supposed boom. Over the last few years G.D.P. growth has been reasonably good, and corporate profits have soared. But that growth has failed to trickle down to most Americans."

Back in August the Census bureau released family income data for 2004. The report, which was overshadowed by Hurricane Katrina, showed a remarkable disconnect between overall economic growth and the economic fortunes of most American families.

It should have been a good year for American families: the economy grew 4.2 percent, its best performance since 1999. Yet most families actually lost economic ground. Real median household income - the income of households in the middle of the income distribution, adjusted for inflation - fell for the fifth year in a row. And one key source of economic insecurity got worse, as the number of Americans without health insurance continued to rise....

Behind the disconnect between economic growth and family incomes lies the extremely lopsided nature of the economic recovery that officially began in late 2001. The growth in corporate profits has, as I said, been spectacular. Even after adjusting for inflation, profits have risen more than 50 percent since the last quarter of 2001. But real wage and salary income is up less than 7 percent.

There are some wealthy Americans who derive a large share of their income from dividends and capital gains on stocks, and therefore benefit more or less directly from soaring profits. But these people constitute a small minority. For everyone else the sluggish growth in wages is the real story. And much of the wage and salary growth that did take place happened at the high end, in the form of rising payments to executives and other elite employees. Average hourly earnings of nonsupervisory workers, adjusted for inflation, are lower now than when the recovery began.

So there you have it. Americans don't feel good about the economy because it hasn't been good for them. Never mind the G.D.P. numbers: most people are falling behind....

[A]dvisers who believe that Mr. Bush can repair his political standing by making speeches telling the public how well the economy is doing have misunderstood the situation. The problem isn't that people don't understand how good things are. It's that they know, from personal experience, that things really aren't that good." More