Wages falling behind while spending more money? Sounds scarily familiar

It isn’t just the resurgence of Democrats at the polls that is making things feel like 2005-06 these days. As I mentioned earlier this month, there’s a worrying trend that we are also returning to the mid-2000s trend of “low wage growth, high spending, low savings.” And two reports released this week indicate that trend may be accelerating.

The first part was with the Census Bureau’s release of the Retail Sales report for November. The November report is understandably more important than most others because it includes Black Friday and Cyber Monday sales for the Holiday season. And the signs were positive for consumer spending, as the sales figures were very strong.

Advance estimates of U.S. retail and food services sales for November 2017, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $492.7 billion, an increase of 0.8 percent (±0.5 percent) from the previous month, and 5.8 percent (±0.7 percent) above November 2016. Total sales for the September 2017 through November 2017 period were up 5.2 percent (±0.5 percent) from the same period a year ago. The September 2017 to October 2017 percent change was revised from up 0.2 percent (±0.5 percent)* to up 0.5 percent (±0.2 percent). Retail trade sales were up 0.8 percent (±0.5 percent) from October 2017, and were up 6.3 percent (±0.7 percent) from last year. Gasoline Stations were up 12.2 percent (±1.4 percent) from November 2016, while Building Materials and Garden Equipment and Supplies Dealers were up 10.7 percent (±2.1 percent) from last year.

But a lot of those extra sales must be going on credit for many people, because a separate report released by the Bureau of Labor Statistics said that earnings failed to keep up with inflation last month.

Real average hourly earnings for all employees decreased 0.2 percent from October to November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported [Thursday]. This result stems from a 0.2-percent increase in average hourly earnings being more than offset by a 0.4-percent increase in the Consumer Price Index for All Urban Consumers (CPI-U).

This is the fourth straight month that real average hourly earnings have declined, a noted reversal from the real hourly wage gains that we saw in 5 out of 6 months between February and July, and down 1.0% percent from that July peak.

With these recent declines, the BLS says real hourly earnings are no different than they were when Donald Trump was elected, with more gains coming from a longer workweek than actual wages.

Real average hourly earnings increased 0.2 percent, seasonally adjusted, from November 2016 to November 2017. The increase in real average hourly earnings combined with a 0.6-percent increase in the average workweek resulted in a 0.8-percent increase in real average weekly earnings over this period.

And another comparison to the mid-2000s involves inflated GDP figures that are a result of this overspending. We had 8 of 14 quarters with GDP growth above 3.0% between 2004 and Q2 2007, blowing the bubble larger, and making the crash worse. Now recognize that Q4 2017 growth will likely be higher than most quarters in the 2010s due to these strong retail sales and other indications of lower savings, despite many people not actually being better off. Uh oh.

And if this Piece of Shit regressive tax bill passes, it’ll put this trend into overdrive, with even more stock buybacks and other profit hoarding by richer people and corporations, and less incentive to add jobs or wages (in fact, it will encourage automation and layoffs). This article from Bloomberg titled "America's Inequality Machine is Sending the Dow Soaring", summed it up quite well.

The Fed’s post-2008 toolkit included massive purchases of financial assets, which supported a liftoff on the markets but took time to trickle through to the real economy. Trump’s tax critics say his plan will have a similar effect, because companies will spend the windfall on share buybacks or dividends, instead of job-creating investments. Plenty of executives say that’s exactly what they’ll do.

Bank of America’s most recent buyback program totals $18 billion. Chairman Brian Moynihan championed the tax proposal this month. “It’s good for corporate America, and it’s good for us,” he said....

Soaring markets helped the top 1 percent of Americans increase their slice of the national wealth to 39 percent in 2016, according to the Fed’s Survey of Consumer Finances. The bottom 90 percent of families held a one-third share in 1989; that’s now shrunk to less than one-quarter.

And if you want to say "Well, at least the 401-ks and investments are growing for everyday people," don't forget that the majority of Americans have few if any investments (as shown by the blue and gray bars in the chart below), and rely on wages and the future promises of Social Security and Medicare to get by.



Put these realities together with the ramifications of this Piece of Shit tax bill, and it means in the next year or two, expect this story to become familiar again for a lot of Americans.