You can forgive the vast majority of Americans for not celebrating last week’s 28th record high of the year for the S&P 500 index. Oh sure, people like to see retirement accounts rise in value, but there is a pervasive sense among workers that they are not getting ahead. In fact, just as the stock market completed its strongest week in four months, a new report from Sentier Research on income revealed that many continue to struggle. As of June, median income for all households, adjusted for inflation, was $53,891. Here's the good news: in the past three years, incomes are up 3.8 percent. The bad news is that in the five years since the recession ended, median income has fallen by 3.1 percent. That’s just one of the reasons that when Federal Reserve Chair Janet Yellen delivered her much-anticipated speech from Jackson Hole, WY, she said that “the unemployment rate has fallen considerably, and at a surprisingly rapid pace,” but “the labor market has yet to fully recover.”
How has it not recovered? Well, as of July, there were 3.2 million workers who have been unemployed for more than 26 weeks and still want a job. Although this is well below the peak of 6.7 million and the lowest level February 2009, it is still very high. Additionally, while the unemployment rate has dropped nearly 4 percentage points from its late 2009 peak to 6.2 percent in July, the broad unemployment rate (defined as the official rate, plus marginally attached workers; those who are neither working nor looking for work, but want a job and have looked for work recently; and people who are employed part time for economic reasons), stands at a lofty 12.2 percent.
And then of course there’s the problem of Americans’ eroding earning potential, highlighted by the Sentier report. But as Yellen noted, part of the problem is structural, meaning that some global economic changes that have put pressure on incomes are here to stay. Sentier found that median income, adjusted for inflation, is 5.9 percent below where it stood in the year 2000. The stunning fact that the average American is WORSE OFF than he or she was fourteen years ago seems to get short shrift in reporting on the recovery.
There are a few factors that have contributed to the longer term slide in incomes: (1) Globalization allowed companies to move operations overseas, where wages were cheaper than in the US; (2) Technological advancements eliminated the need for as many workers overall; and (3) Most public companies have been more concerned with boosting share prices than in paying workers.
In an effort not to end on such a downbeat note, it’s worth noting that economists believe that as the economy continues to improve, incomes will slowly rise. Unfortunately, that may be cold comfort to millions who are having a hard time meeting their daily obligations. As one radio listener recently said, “I like when my 401K goes up, but it doesn’t help me pay the utility bill!”
MARKETS: Just in time for the busy Labor Day weekend, oil and gas prices have dropped to near 6-month lows.
- DJIA: 17,001, up 2% on week, up 2.6% YTD
- S&P 500: 1988, up 1.7% on week, up 7.6% YTD
- NASDAQ: 4464, up 1.7% on week, up 8.7% YTD
- 10-Year Treasury yield: 2.41% (from 2.34% a week ago)
- October Crude Oil: $93.65, down 1.2% on week
- December Gold: $1280.20, down 1.9% on week
- AAA Nat'l average price for gallon of regular Gas: $3.44 (from $3.54 a year ago)
THE WEEK AHEAD:
10:00 New Home Sales
10:30 Dallas Fed Survey
8:30 Durable Goods Orders
9:00 Case-Schiller Home Price Index
10:00 Consumer Confidence
8:30 Weekly Jobless Claims
8:30 Q2 GDP – 2nd estimate (Preliminary: 4%)
8:30 Corporate Profits
10:00 Pending Home Sales
8:30 Personal Income and Spending
9:45 Chicago PMI
9:55 Consumer Sentiment