Our So-Called Boom
Our So-Called Boom
By PAUL KRUGMAN
Published: December 30, 2003
It was a merry Christmas for Sharper Image and Neiman Marcus, which reported big sales increases over last year's holiday season. It was considerably less cheery at Wal-Mart and other low-priced chains. We don't know the final sales figures yet, but it's clear that high-end stores did very well, while stores catering to middle- and low-income families achieved only modest gains.
Based on these reports, you may be tempted to speculate that the economic recovery is an exclusive party, and most people weren't invited. You'd be right.
Commerce Department figures reveal a startling disconnect between overall economic growth, which has been impressive since last spring, and the incomes of a great majority of Americans. In the third quarter of 2003, as everyone knows, real G.D.P. rose at an annual rate of 8.2 percent. But wage and salary income, adjusted for inflation, rose at an annual rate of only 0.8 percent. More recent data don't change the picture: in the six months that ended in November, income from wages rose only 0.65 percent after inflation.
Why aren't workers sharing in the so-called boom? Start with jobs.
Payroll employment began rising in August, but the pace of job growth remains modest, averaging less than 90,000 per month. That's well short of the 225,000 jobs added per month during the Clinton years; it's even below the roughly 150,000 jobs needed to keep up with a growing working-age population.
But if the number of jobs isn't rising much, aren't workers at least earning more? You may have thought so. After all, companies have been able to increase output without hiring more workers, thanks to the rapidly rising output per worker. (Yes, that's a tautology.) Historically, higher productivity has translated into rising wages. But not this time: thanks to a weak labor market, employers have felt no pressure to share productivity gain
What the good professor is not saying, but you should be aware of is this: Wal-Mart was dumping things like indoor grills at $4.83, nearly at cost. Which means they didn't make a whole lot of money. People bought less and spent less. When the Kool Kids Klub gets on TV and talks about the economy getting better, it is for them. For most of us, the economy has stagnated. When you see strong economic messages from the Dems and their allies, they will resonate, because people still don't have work.
This is laying the ground for a strong democratic campaign, because of the time-tested theme "Are you better off now than you were four years ago." That basic message will have a resonance that the war on terror simply doesn't. So when you hear the latest idiocy from David Brooks, remember, he makes a lot more money than you.
posted by Steve @ 2:42:00 AM