January 02, 2004

The Second Gilded Age

The Economic Policy Institute points out that while real GDP grew 3% in the second half of 2003, real wages did not grow at all.

Posted by DeLong at January 2, 2004 08:02 AM | TrackBack

Comments

Like I said ...

Posted by: John H. Farr on January 2, 2004 08:16 AM

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Hm. I was just reading a day or two ago about how high-end retailers (like Hammaker-Schlemmer) did well over the Christmas season, but Wal-Mart didn't. People are talking about how well "the economy" is doing when they mean how well "the market" is doing. Now this. Is anybody else having deja vu to the Reagan years (besides Ronnie, I mean)?

Posted by: Mike Jones on January 2, 2004 08:24 AM

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These are certainly not good news for Mr. Bush. The main stream families havin a hard time gettin by, rather than a percentage point down in unemployment rate, hurst the incumbent administration more and substantially so.


I mean, during the depression years a man in New York gets up in the morning and it is a terrible day, rain and all, he wants to take a shower and there is no water; he steps outside and a car passing by spills mud all over him; he enters office and all his stock shares are down; he comes back home and wife has left him. The man has had it now, he has got to scream! He opens the windows and yells with all the strength he can muster:

THAT SON OF A BITCH ROOSEWELT!!!!

Or whomever was the Presdient at the time, I might be mixing up the name -- but I think it was Roosevelt, played by Robert Vaughn, as I recall the TV image...

And, on the matter of unemployment: Nobody votes on the basis of BLS figures on employment. If a person votes on the basis of employment situtation, it is his or her employment situation. So, any statistical cosmetics won't help any incumbent administration.

Mr. Dean, nevertheless, must be able to show an alternative way, a better way, if he is to win the election.

Incidentally, I think Mr. Kurgman is a smart man and he does support Howard Dean, cause he refers to him as Mr. Dean, rather than Dr. Dean.

I mean the man's "Dean" anyway... and so I think Dr. Dean sounds like Dr. Pepper or something... somebody ought to pull the ears of Howard Dean campaign advisors on that one...

Posted by: bulent on January 2, 2004 10:29 AM

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A question:

During the '92 to 2000-something expansion at what point did real wages start to grow? I seem to remember reading a book by Robert Reich written sometime after he left the Clinton administration in which he complained that the expansion was not beneffiting workers.

I wouldn't even know where to look, but I am sure that someone here does.

Posted by: Jason on January 2, 2004 10:56 AM

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Two points. One, contrary to the figures of GDP, the Economic Policy Institute doesn't say where their figures of real wage growth come from. Again, and as pointed out by EPI, for GDP-figures they rely on the consensus numbers. Maybe there is no such consensus of real wage growth. Is this why they don't cite their source?
Second, i don't know if the figures mean that much. EPI: "Economists correctly point out that wage growth responds to overall growth with a long lag, but this is of little consolation to the working experiencing significant cognitive dissonance as they hear the economic cheerleading coming from most market analysts". So wage growth maybe will respond after all. Even EPI acknowledges that.

Posted by: Ivan on January 2, 2004 11:05 AM

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Wasn't the same true during the last expansion? In 1999, I believe, I read a book by Robert Reich in which he complained that the Clinton boom had not benefited regular workers. Of course, history had passed him by by then.

My question is at what point in the post '92 economic expansion did real wages begin to follow GDP upwards? I would not know where to look, but I am sure that someone here would.

Posted by: Jason on January 2, 2004 11:05 AM

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Sorry about the double post. I swear that I checked and the first one did not go through.

Posted by: Jason on January 2, 2004 11:30 AM

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I am looking at a chart of y/y growth in real wage and salary income. In the 1990 recession it fell to about -3% at the economic bottom---2% was the bottom in 1960,1970 & 1982 & in 1975 the bottom was -5%. In each of those cycles real wage & salary income growth turned positive within a year from the bottom. In this cycle it bottomed at about -2% and two years into the recovery is on the verge of just now turning positive. In the 1990s real wage & salary growth rose steadily from about 2% to 3% in the early 1990s to a peak of about 7.5% in 1998.
In the 1980s this series jumped to 7.5% in the first year of recovery and than slowed to about 4% for the rest of the 1980s.

The analysis made in the earlier post that the
econ cycles seems to be following a normal pattern after about a one to two year delay
that can be largely attritubated to several points.

One is the
unusual nature of the downturn. The downturn was a product of the HT boom collapsing
rather than a typical cycle caused by inflation and tight money.

One is the impact of 9/11 and the war on terror.

One is the poor response of the Bush Admin in
implementing a very poor fiscal package that provided a very small short run boost to the econ while creating a very large sructural or
long term deficit.

Posted by: spencer on January 2, 2004 02:05 PM

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"If a person votes on the basis of employment situtation, it is his or her employment situation. So, any statistical cosmetics won't help any incumbent administration."

Are you sure? There are enough people who still have a job, and many companies are doing reasonably well. With the U-6 figure at 9.7%, somewhere up to 90% of the "labor force" are employed (now whether this labor force is measured correctly was the subject of another thread).

And most of the indicators are "leading" or "lagging" indicators, meaning if it has not triggered yet it is lagging, otherwise it's leading. Of course this is baloney, but I'm only partially kidding here. Remember how since 2001 the recovery has always been 3-6 months away?

I know quite a number of people whose sentiment is to a large extent driven by the much-touted market indicators. When people talk about the "market", it often sounds to me as if the purpose of the economy is to generate favorable indicator readings, not to improve peoples' lives or such.

Even if they have friends and neighbors who got laid off and have a hard time landing a decent enough job, there may be the "won't happen to me" attitude. (Well, they cannot lay off everybody, right?)

Also some people are always willing to explain things after the fact and attribute blame -- OK, this guy got laid off, probably he did not perform very well, that guy says he can't find a job, well, he is sitting on the patio the whole day smoking, etc.

Posted by: cm on January 2, 2004 03:04 PM

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Bulent:

Re: your story

His wife left him for Roosevelt? Roosevelt must have had a lot of women around, being the Depression and all.

But at least it was raining. In the Midwest there was very little rain, and many people lost their farms. So how is it, anyway, that the natural world and the man-made world line up at the same time to hit us so hard?

Posted by: northernLights on January 2, 2004 05:44 PM

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Hmm, personally I'm always suspicious of EPI's
numbers, in the same way that one should always
be suspicious of numbers coming out of Heritage
or Cato. It's not that they're always sketchy,
but often enough to make one wary.

I remember way back in mid 90's reading a
paper by EPI where they estimated "job loss
due to NAFTA" without really explaing their
methodology. A little digging turned up that
they just took the US-Mexico deficit,
divided it by average income and voila, job loss.
Of course it's nonsense.

Then several years later I read something by,
yes, Krugman, who was pointing out that EPI
was up to no good again, this time in respect
to China's MFN status. The problem for them was
that now, there was actually a surplus for US-China trade (or a decrease in the deficit, I
can't remember) so they couldn't use the old
trick and get the results they wanted. How did
they cope? Well, this time they just took the
US-China trade volume (exports and imports),
divided by average income, and presto, job loss
again.

Again, it's not that everything they do is bogus.
But then, those studies by the tobacco industry
that nicotine marginally lowers your risk of
becoming schizophrenic supposedly are true as
well.

Posted by: radek on January 2, 2004 06:13 PM

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"His wife left him for Roosevelt? Roosevelt must have had a lot of women around, being the Depression and all."

The legend goes that Roosewelt arranged for Depression just so that women may leave their hubbies and rush towards the White House stepping on each other and smothering the President!


Posted by: bulent on January 3, 2004 12:16 AM

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bulent-

Wow, you are a veritable fountain of little known American History legends! I wish I could read the stories of some of those women.

Posted by: northernLights on January 3, 2004 08:09 PM

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If real hourly wage growth underperforms, then median real hourly wage growth tends to underperform to a greater degree.

The data since 2000 shows some life in real wage growth, but shows a flatline for median real wage growth.

Posted by: Rich on January 4, 2004 10:34 AM

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