Have Pity On The Working Man

(And women of course also, as well as families in general...).

Our 8th district U.S. Congressional representative noted this in a Q&A session with Patrick Murphy about the Iraq war yesterday.

“The economy is in good shape considering the war, September 11th, and two major hurricanes.”

I hate to admit it, but a lot of the macro-level data I see regarding corporate hiring and unemployment in Bucks County bear that out. However, a lot of that data is put out by Bushco’s Department of Labor, so you can be sure that they are going to rig it every way over Sunday. Also, as Paul Craig Roberts and others have pointed out many times, this administration refuses to keep track of jobs lost to offshoring and actually encourages companies as to the tax advantages of this awful practice, so I don’t see how you can get a true picture of what’s going on out there anyway.

This article in The Philadelphia Inquirer by business writer Kevin G. Hall appeared last May.

WASHINGTON - The U.S. economy is strong these days when measured by macro-statistics, but sluggish wage growth, rising gasoline prices and interest rates, and the gloomy background music from the Iraq war are overshadowing the good economic news in the minds of most Americans.

To be sure, corporations are raking in strong profits, which are driving the stock market near its all-time high. Unemployment remains near historic lows. Even a slump in home sales has not significantly slowed consumer spending.

But when pollster Gallup recently surveyed Americans, 64 percent said the economy was getting worse. Only 33 percent described it as good, 40 percent as fair, and 23 percent as poor. And that survey was taken March 13 to 16, before gasoline prices leapt more than 30 cents a gallon to a national average of $2.92. The survey had a margin of error of plus or minus 3 percentage points.

Pollsters, said Frank Newport, editor in chief of the Gallup Poll, "are picking up decade-long lows" for citizen views about the White House and Congress, fueled by the unpopular war in Iraq, among other downers. Those views cloud feelings about the economy.

Experts agree that U.S. economic growth is above historic norms. In late April, the Commerce Department reported a sizzling first-quarter annual growth rate of 4.8 percent in the nation's gross domestic product, the broadest measure of the economy. And at 4.7 percent, unemployment hovers near all-time lows.

Despite falling stock prices Thursday and Friday, the Dow Jones industrial average closed Friday at 11,380.99, not far from its all-time high of 11,722.98 set Jan. 14, 2000. That has lifted millions of U.S. workers' retirement holdings.

So why aren't Americans celebrating?

"It's not showing up in their paychecks the way you'd expect," said Jared Bernstein, chief economist for the liberal Economy Policy Institute in Washington. "The gap between the economy from 40,000 feet and on the ground level just seems to get wider with every new report."

The same week that the GDP numbers came out, the government also reported that worker compensation - pay and benefits - rose in the year's first quarter at an annual rate of 2.4 percent, the slowest rate in seven years. That figure, Bernstein said, suggests that workers' wages are not keeping pace with wage gains during past economic expansions, or even with inflation, which rose 3.4 percent over the year ended in March as measured by the Consumer Price Index.

"The problem is you have faster-growing prices colliding with nominal wage growth that has been pretty unimpressive," he said.

Some on Wall Street agree.

"Only the elite at the upper end of the occupational hierarchy have been spared the pressures of an increasingly brutal wage compression," said Stephen Roach, chief economist for banking giant Morgan Stanley.

In a March analysis for investors, Roach concluded that an increasingly globalized U.S. economy is not a rising tide that lifts all boats. Instead, "the rich are, indeed, getting richer, but the rest of the workforce is not."

A closer look at the composition of the workforce helps explain why many Americans are not cheering all the strong economic news in the headlines.

The Labor Department said in 2004 that 51.6 percent of all workers are concentrated in five job categories with mean-average hourly wages of $15.50 a hour or less. The national mean-average wage was $18. Those are the people most likely to suffer from rising gasoline prices and credit rates.

In fact, two government measures of workers' pay - median weekly earnings and a broader index that adds benefits such as health insurance to compensation - grew more slowly than inflation over the last 12 months, and two other wage indices surpassed inflation only slightly. That suggests that many workers' incomes are either losing ground or barely holding even.

What is behind the tepid wage growth is debatable. Union leaders say companies are retaining more profits at workers' expense. Business leaders say they have been paying more for benefits such as health care and that has stifled wage growth.

Another theory, supported by Morgan Stanley's Roach, is that greater global competition has created a huge supply of workers around the world that effectively keeps the price of U.S. labor closer to international norms.

The chairman of President Bush's Council of Economic Advisers, Edward Lazear, acknowledged on May 2 that wage growth had lagged, but he said it would soon follow economic growth.

"As the expansion progresses, wages tend to catch up to productivity growth, and eventually the growth rate of wages exceeds that of productivity... . We are moving into that phase," Lazear told the Hudson Institute, a conservative policy-research center. Productivity measures a worker's output per hour. For the last decade, it has outpaced historic norms.

On May 5, the Bureau of Labor Statistics reported that hourly wages are up 3.8 percent over the last 12 months, supporting Lazear's view that a turn is coming. The bureau also said that average weekly earnings are up 4.1 percent.

The Bush administration, deflecting criticism about sluggish wage growth, is talking up the economy's rebound in job creation, after years of a "jobless recovery," with 32 consecutive months of job growth and 2.5 million net new jobs over the last year.

But there were 143.7 million active workers on payrolls in April, and most of their wages have grown more slowly in recent years than they did during past business cycles.

Martin Regalia, the chief economist for the U.S. Chamber of Commerce, said he thought the economy would slow in the second half of this year. Third-quarter growth numbers will be released shortly before November's congressional elections. If they show a significant slowdown, as Regalia and most mainstream economists expect, that could turn voters against the governing Republican Party.

"How do you spin that politically?" Regalia asked. "It's been hard to sell this economy to the general public while it's been very good. How are we going to sell it when it is just good?"

Here is my totally unscientific take on what is happening based on discussions with family members and friends who have changed jobs or sought work (and some of this is partly true regardless of economic conditions any more, I admit):

If you have about 5-7 years of experience in the workforce, this is the economy for you. An employer can pay you a respectable wage and you will be marketable because you have just enough experience so that you don’t have to be trained completely from the ground up in how your profession will match the requirements and “corporate culture” (sorry…I hate that phrase) of your employer. Also, entry level candidates with 1-2 years of experience should be able to get a job doing menial work, but if you get a primo entry level salary, you should count your blessings that it has not been hurt because of offshore competition.

If you have 10 years or more of experience and you are looking for a job, be prepared for what likely will be a minimum 9-month slog through pointless interviews with inane recruiters and other human resources people and clueless hiring managers who will be intimidated by your experience. It is highly possible that you will have to somehow latch onto a contracting job which will likely represent a cut in your former salary and ride that out until it either turns into a salaried position with benefits (and who knows how long that may take) or you find another permanent position elsewhere (and of course, there is no guarantee that any of this will happen – you may find yourself penalized by your extensive education and experience to the point where you may have to explore an entirely new career to maintain your prior earnings because you are now untouchable in your former field).

I’ve attached two links: the first is to this column by Greg Anrig, Jr. of The Century Foundation in which he takes about as clear-eyed of a look at our economy as I’ve ever seen (besides Hall's article) and proposes some changes to the unemployment insurance system, including a wage insurance plan that would lessen the decline in compensation that many workers experience when they take a new job after becoming unemployed; the second is to this CNN article a friend of mine sent to me with some truly horrendous employment termination stories (and I know I only posted on this a few weeks ago anyway - here's the link).

And let us continue to do all we can, by the way, to make sure that, come November 8th, Mike Fitzpatrick will know firsthand what it means to look for a new job.