Wages Will Increase When Productivity Does

There are three things we can say about income with a degree of certainty:

  1. You’re earning less than you did before the financial crisis.
  2. You are overdue for a raise.
  3. You are unlikely to get a raise anytime soon.

If these three statements fit your personal circumstances, you can take some consolation in knowing that you are not alone and that there is likely not much you can do about it.  Using the financial crisis that began in 2007 as a baseline, the Economic Policy Institute found that wages have dropped by an average of up to 5.9%, depending on the category of worker to which you belong. Employees with advanced degrees are the only group that didn’t see its income drop, but that group didn’t see its income rise, either. declining-wages

While the rate of inflation has been low throughout that period, it is still eroding your purchasing power and affecting your standard of living.

Why is income lower today than it was in 2007?

Lower Profits.  A major reason you’re earning less—and why you’re unlikely to get a raise anytime soon—is that your employer is earning less.

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Set. Down. No Hike.

The economic outlook can be summed up in five words: Everything’s great, except what isn’t.

We’ll lead with the “everything’s great” part, as seen through the filter of the Federal Reserve Board.  As Fed Chair Janet Yellen reminds us after every meeting, the Fed has two goals—lowering the unemployment rate and stabilizing prices.

The Fed’s target unemployment rate is 4.7% to 5.8% and, if you believe the U.S. Bureau of Labor Statistics (see below re: why you shouldn’t), the Fed has accomplished that goal, as the current rate is at an eight-year low of 4.9%.  The Fed’s target inflation rate is 2% and, depending on how you measure inflation, it’s close to that number.Stock Prices

“The Fed’s preferred measure, the personal consumption expenditures price index, rose 1.3% in January from the previous year, and so-called core inflation—which excludes volatile food and energy prices—was 1.7%,” The Wall Street Journal reported. “The consumer-price index rose 1% in February from a year earlier, but core CPI was up 2.3% for the year, the largest 12-month increase since May 2012.”

So the Fed could have logically declared its mission accomplished and begun to gradually increase interest rates, as was expected after December’s initial miniscule rate increase.  So why was the vote at last wek’s meeting 10-1 against a rate hike?

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Mutually Assured Destruction

Iran, North Korea and the world’s other despots may be able to take over the world without going nuclear or even firing a single shot.

That’s because much of the free world seems bent on destruction from within, done in by a Keynesian death spiral.

Apparently, no one believes in capitalism anymore.  Instead, central bankers, who now control the economy in most of the world, are hell-bent on continuing to dig the negative-interest-rate hole ever deeper, until it is impossible to climb out.

While central bankers have only made matters worse with their easier-than-easy monetary policies, they’re so deeply invested, and so far down the rabbit hole of negative interest rates, they can’t turn back. Draghi

It may not be working, but admitting as much would bruise many strong egos, scare investors and sink stock prices.  So they keep digging.

A Bigger Bazooka

A year ago, Mario Draghi, head of the European Central Bank, announced the start of an asset-purchasing program similar to the Federal Reserve Board’s quantitative easing (QE) program through which the ECB would spend €60 billion a month on Eurozone government bonds.

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Making America Great Again

It’s clear that in spite of boisterous bad behavior, a lack of workable policies and a few very bad ideas, Donald Trump is the odds-on favorite to become the Republican nominee for president of the United States.

Why?  It may be that his theme of “Making America Great Again” is resonating with voters.

While starting trade wars and building a wall to keep out Mexicans would have the opposite impact, American greatness could emerge as the theme of this campaign.

That’s because, as the charts below demonstrate, America’s greatness has faded mightily during President Obama’s administration.  Home ownership, median family income and labor force participation has plummeted.  Meanwhile, student loan debt, the use of food stamps (aka the Supplemental Nutrition Assistance Program or SNAP), federal debt, money printing, healthcare costs and—not coincidentally—black inequality have soared.20160301_obama_0

So voters have latched onto The Donald as the anti-Obama.

Why Candidate Trump Exists

In fact, former Louisiana Governor Bobby Jindal, whose own presidential candidacy never gained any traction, notes in The Wall Street Journal that Presidential candidate Trump would not exist if not for President Obama.

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