A Real Picture Of The Economy

Post by WCmutant at ATS

Stagnant. That’s the word that best describes our economy over the last 6-7 years from the 2008/2009 recession.

In this post I want to discuss the important aspects of an economy:
1. Wages
2. Job growth/unemployment
3. Retail sales

Too many people point to the stock market as an indicator of economic health. Some of you reading this may still do that, while many others have wised up and realize it’s nothing more than gambling – mainly for the rich. This is why I focus on Wages, Jobs, and Sales. These three factors give you a better picture of the millions of Americans that haven’t invested much (if any at all) in the stock market.

Wages
According to the most recent September 2015 Census Bureau report 2014 wages have been stagnant and are in fact down from 2007 (pre-recession).
Census LinkPage 13 provides a graph and highlights

You find that for 2014 average wages are not statistically significant from 2013 wages, and 2011 and 2012 saw declines in average wages. So, average wages (for everyone) have declined and now flattened out but are still not where they were prior to the recession – 6.5% lower 2014 vs. 2007.

If you are Asian, good news – your average wages are higher than any other race. If you are white, also good news, you make the 2nd highest average wage. If you are black you make the lowest average wage and hispanics follow right behind. More importantly the average wage for non-whites (asian, hispanic, black) had no statistically significant change from 2013 to 2014. However, the bad news for this same period whites saw a 1.7% decrease in average wages.

Jobs/Unemployment
As an economist, this is one of my most hated statistics reported. Unemployment numbers are only based on people (age 16+) actively looking for jobs (last 4 weeks). People that give up on looking for jobs aren’t included in this statistic.

It’s important to understand that the BLS (Bureau of Labor statistics) attempts to track people in the “Not in Labor Force” (NILF) and they also have “Marginally Attached Workers” (MAW) and “Discouraged Workers” (DW). Both the MAW and DW groups (age 16+) are NOT included in the unemployment figures because they have not actively looked for work in the last 4 weeks.

To get a better understanding of what has really been happening (because a picture is worth a thousand words) I’m including two recent graphs from the BLS website.

Graph for Unemployment numbers (notice the downward trend):

Graph for Not in Labor Force numbers (notice the upward trend):

For reference: BLS Link to Graph 1 and BLS Link to Graph 2

As you can see the unemployment rate is indeed dropping. But of much more concern are the growing number of people that are NILF because they have given up. This paints a much more bleak picture of our economic conditions than the simple unemployment rate provides.

Retail Sales
In February 2014 the National Retail Federation (NRF) provided a forecast that retail sales were expected to grow by 4.1% over the next year (LINK). However, by July 2015 they had to adjust their forecast downward to 3.5% (LINK).

Graph showing the flattening of retail sales over the last 3-4 years:

Reference for this graph is at the NRF website, LINK.

Final Thoughts:
Now, I’m not intending to present an alarmist picture. However:
1. Lower average wages from pre-recession (2007)
2. flattening retail sales
3. Increases in the Not In Labor Force numbers

Add to that the stock market is moving into a much more volatile time period and there are continued restructuring (layoffs) in many industries around the world to save those companies money (Hewlett Packard, Catepillar, ConAgra, Walmart, Target, Air France, etc.) and we might be missing some signaling of things to come over the next 1-3 years.

Wal-mart stock price plummets and the billionaire heirs lose in the neighborhood of $9-11 billion in one day, Bloomberg. I can tell you this, any restructuring they do is going to preserve their own greedy pockets not those of the average worker.

My quick stock market forecast:
I’m expecting to see dips in the markets Mid-November into Mid-December (approx. Nov. 17 through Dec. 20). And again market dips in the Spring of 2016 Mid-April to Mid-May. The downward trend will continue as we move more toward a new paradigm, yeah I said paradigm because that’s the best way to describe it at this point.

What do we do?
It’s time to begin imagining and possibly implementing a better system. Complaining and pointing out the faults of the broken system that we have only goes so far, we must begin.

RKRC!

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