Sunday, August 28, 2005

Numbers not showing true economic impact on families

Will the news media start calling it "The Hidden Recession"?

Maybe not until someone starts camping out on Bush's doorstep about it.

American families don't care about GDP. They care about whether jobs are available, how much those jobs pay and how that pay compares with the cost of living. And recent GDP growth has failed to produce exceptional gains in employment, while wages for most workers haven't kept up with inflation.

About employment: It's true that the economy finally started adding jobs two years ago. But although many people say "Four million jobs in the past two years" reverently, as if it were an amazing achievement, it's actually a rise of about 3 percent, not much faster than the growth of the working-age population over the same period. And recent job growth would have been considered subpar in the past: Employment grew more slowly during the best two years of the Bush administration than in any two years during the Clinton administration.

It's also true that the unemployment rate looks fairly low by historical standards. But other measures of the job situation, such as the average of weekly hours worked (which remains low), and the average duration of unemployment (which remains high), suggest that the demand for labor is still weak compared with the supply.

Employers certainly aren't having trouble finding workers. When Wal-Mart announced that it was hiring at a new store in Northern California, where the unemployment rate is close to the national average, about 11,000 people showed up to apply for 400 jobs.

Because employers don't have to raise wages to get workers, wages are lagging behind the cost of living. According to Labor Department statistics, the purchasing power of an average non-supervisory worker's wage has fallen about 1.5 percent since the summer of 2003. And this may understate the pressure on many families: The cost of living has risen sharply for those whose work or family situation requires buying a lot of gasoline.

...

You may ask where economic growth is going, if it isn't showing up in wages. That's easy to answer: It's going to corporate profits, to rising health care costs and to a surge in the salaries and other compensation of executives. (Forbes reports that the combined compensation of the chief executives of America's 500 largest companies rose 54 percent last year.)

The bottom line, then, is that most Americans have good reason to feel unhappy about the economy, whatever Washington's favorite statistics may say. This is an economic expansion that hasn't trickled down; many people are worse off than they were a year ago. And it will take more than a revamped administration sales pitch to make people feel better.
Numbers belie economic impact

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