Labor Day Lament


Labor Day became a federal holiday in 1894 and according to the Labor Department, the day “is dedicated to the social and economic achievements of American workers. It constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.” The establishment of a specific holiday honoring employees was meant to signify a shift from the brutal working conditions of the Industrial Revolution, where many workers faced long hours and extremely unsafe working conditions, to a new century where workers’ rights would be celebrated. I hate to rain on your Labor Day holiday, but the economic recovery has not delivered the goods for many Americans. Last week in this space, I lamented the divergence between household income and the stock market, which has led to a two-tiered recovery. Proof of that split was evidenced in a recent Rutgers University report Unhappy, Worried, and Pessimistic: Americans in the Aftermath of the Great Recession,” which found that “the protracted and uneven recovery from the Great Recession has led most Americans to conclude that the U.S. economy has undergone a permanent change for the worse. Seven in ten now say the recession’s impact is permanent, up from half in 2009 when the recession officially ended.”

And just in time for this week’s release of the August jobs report and the government analysis of worker productivity, the liberal think tank Economic Policy Institute has issued a sobering report, called “Why America’s Workers Need Faster Wage Growth”. The report rehashes much of the income inequality data that has been discussed for some time (see “Income Gap Blows Out: Rich Get Richer”), including the fact that despite overall gains in productivity, wages for the vast majority of Americans have gone nowhere fast. But a small percentage of higher income earners have done quite well. The top one percent of earners saw cumulative gains in annual wages of 153.6 percent between 1979 and 2012—far in excess of economy-wide productivity growth and over four times faster than average wage growth. These top earners also did better than those in the 90th through 99th percentiles.

Barry Ritholtz points out, “The recovery is here, it just isn't evenly distributed.” He goes on to cite last year’s Pew Research Center report, which showed that most of the wealth accumulation in the recovery has gone to the top seven percent of wage earners, mainly because of gains in financial markets. “As for the other 93 percent, its wealth has declined 4 percent.”

Before you bombard me with accusations of being a Debbie Downer, there are some glimmers of hope. Weekly jobless claims are at eight-year lows; the economy is producing an average of 230,000 jobs per month this year; and small businesses are feeling more confident in the overall economy, the future of their own business and have made important steps forward in hiring. But I also receive countless e-mails and comments from people who are working their butts off, but can’t seem to get ahead.

Beyond the feel-good notion that an expanding economy should help the majority of workers, we all have a vested interest in everyone being able to celebrate Labor Day, not just a fraction of us. If incomes were to rise for a greater number of people, it would likely prompt an increase in consumer spending, which in turn should lead to more job gains and a further increase in incomes. Let's hope that the so-called “virtuous cycle” will begin in earnest, as economic growth becomes stronger and more widespread...then everyone can enjoy the fruits of the recovery and we can all celebrate Labor Day.

MARKETS: It was the best August in 14 years for stocks. The S&P 500 took out 2,000, pushing it up a staggering 195 percent since the March 2009 low. That makes the current bull market the fourth-best since 1928 in terms of both duration and magnitude.

  • DJIA: 17,098, up 0.6% on week, up 3.6% on month, up 3.2% YTD
  • S&P 500: 2003, up 0.8% on week, up 3.8% on month, up 8.4% YTD
  • NASDAQ: 4464, up 1.7% on week, up 4.8% on month, up 9.7% YTD
  • 10-Year Treasury yield: 2.34% (from 2.41% a week ago)
  • October Crude Oil: $95.96
  • December Gold: $1287.40
  • AAA Nat'l average price for gallon of regular Gas: $3.44 (from $3.56 a year ago)



Tues 9/2:

9:45 PMI Manufacturing Index

10:00 Construction Spending

Weds 9/3:

Motor Vehicle Sales

2:00 Fed Beige Book

Thurs 9/4:

8:15 ADP Private Employment

8:30 Weekly Jobless Claims

8:30 International Trade

10:00 Productivity

10:00 ISM Non-Manufacturing

Fri 9/5:

8:30 August Jobs Report