The Seattle Times has a brief (and by no means comprehensive) article about the state of the economy, or how is it that record setting stock markets and profit margins aren’t making people feel better about the economy.

Experts agree that U.S. economic growth exceeds historic norms. In late April,
the Commerce Department reported a sizzling first-quarter annual growth rate of
4.8 percent in gross domestic product (GDP), the broadest measure of the
economy. Unemployment, at 4.7 percent, hovers near all-time lows.

Like I said- it’s the disparity stupid!

The same week that the robust GDP numbers came out, the government also reported that 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. That figure, Bernstein said, suggests that workers’ wages aren’t keeping pace with gains during past economic expansions.

So wages aren’t keeping up with inflation (nothing new there), employers don”t want to pay higher wages because they 1) have to keep up with globalization and 2) are paying more towards healthcare (all while employer provided healthcare is becoming more rare- 45% of Americans don’t have health insurance at all).

Let’s look at some numbers:

In 2004 (the last year that census numbers are availalbe for) the number of people living in poverty rose to 12.7% or 37 million people. That was the 4th straight year in a row that the number went up. The US also has the largest percentage of people living in poverty in the developed world. How’s that for the American dream? (And why do I have to get my numbers from Brittish newspapers?)

The minimum wage of $5.15 an hour has not risen since 1997 and, adjusted for inflation, is at its lowest since 1956.

The top 20 per cent of earners take over half the national income. At the same time the bottom 20 per cent took home just 3.4 per cent

The United States has 269 billionaires, the highest number in the world

These statistics all use the government’s guidelines for poverty thresholds which haven’t been changed since 1955 and don’t include health care, child care, housing and transportation (according to Duke Professor David Brady– who may have to go on my hot brains list). If Brady’s numbers were used insted, the poverty rate is closer to 17%.

But back to the Seattle Times article. If we are in an economic boom with low unemployment- why aren’t wages climbing faster?

“As the expansion progresses, wages tend to catch up to productivity growth, and eventually the growth rate of wages exceeds that of productivity. … We are moving into that phase,” Lazear told the Hudson Institute, a conservative policy-research center.

However:

Martin Regalia, chief economist for the U.S. Chamber of Commerce, said he thinks the economy will slow in the second half of this year.

So if the economy is looking at a near-future slowdown and wages have yet to catch-up, what happens next?