The U.S. economy is strong! The tax cuts are working and we must make them permanent! The estate tax, (now known as the “death tax”), must be repealed! We have to do this to keep our economy strong and growing!
If you have any exposure to traditional media, there is no doubt that you have heard these phrases. But, I ask, how’s your “personal economy” doing these days? How did you like your last raise? (what??? You didn’t get a raise? ) But you received a tax cut, didn’t you? (you mean the one that we didn’t notice because the price of EVERYTHING has risen and the cut was barely noticeable?). What’s that I hear about how your money just doesn’t seem to go as far as it used to go?
I think it is time to take a look at some real numbers. We can find those numbers at our own government’s websites.
Let’s start with wage growth. According to the Bureau of Labor Statistics, the average hourly pay of non-supervisory workers was $14.70/hour in 2001. In May 2006, it was $16.62/hour – an increase of 13.06%. But you say, “That’s an increase, right?”. Sure it is, if you don’t take into account the rate of inflation from 2001-2006. From that time period, the measure went from 177.4 to 202.5. That equates to an increase of 14.15%. In reality, wages have decreased 1.09% over the past five years when you take inflation into account for this category of workers.
Four year college graduates’ wages have also gone down. And, the following figures do not take into account the inflation measure: In 2000, the average salary was $54,396; in 2004, it was $51,568. This is a 5.2% decrease.
Now, high school graduates’ salaries did rise. Let’s look at the numbers. In 2000, the average salary was $28,179; in 2004, it was $28,631. That is an increase of $452, or 1.6%. Wow! That’s about an $90/year average increase – about $7.50/month! And again, these figures do not take into account the inflation measure.
We are told that with this country’s low unemployment rate, we are essentially considered to be at full employment. Traditionally when that happens, wages rise and the job creation rate grows. Again, as above, the wage rate did rise; however, when you take into account that pesky inflation rate, the wage rate actually dropped 1.25%. (12/05 – wages $16.35/hr and inflation rate was 196.8; 5/06 – wages $16.62/hr and the inflation rate was 202.5.)
Now, let’s look at job creation statistics. For each of the periods of economic expansion since 1961, the compound rate of establishment job growth averaged between 2.01% (3/91-3/01) and 3.56% (3/75-1/80). However, during this latest period of economic expansion, which started 11/01, the rate has grown only 0.71%. The current administration holds the lowest rate of job creation during an economic expansion period in the past 40 years, and the tax cuts that were supposed to boost job creation has not worked as expected.
Economic Expansion Job Growth Statistics (compounded)*
2/61-12/69 ** 53,556,000/71,240,000 ** +17,684,000**+3.283%
11/70-11/73 * 70,409,000/77,909,000 ** + 7,500,000 ** +3.43%
3/75-1/80 ** 76,649,000/90,800,000 ** +14,151,000 ** +3.56%
11/82-7/90 ** 88,770,000/109,773,000 * +21,003,000 ** +2.8%
3/91-3/01 **108,542,000/132,504,000 * +23,962,000 ** +2.01%
11/01- **130,883,000/135,230,000 * + 4,347,000 ** +0.71%
(*Credit for the computation of this chart belongs to a friend of mine)
Our average wages are stagnant or in many cases, have declined. Job creation rate is the lowest for an “economic expansion” period in the last 40+ years. Our unemployment rate is reported as low; specifically, we are told we are at full employment. However, the traditional trends for full employment, such as higher wages and job creation, are not apparent. It does not look as though these large tax cuts for the wealthiest citizens in the U.S. are “trickling down” to the rest of us.
Tomorrow, I will discuss aspects of U.S. personal debt statistics and other areas that affect the U.S. economy.