The economic recovery

[admin]

If you can call it that. Few characteristics:

Simple national income and product accounting tells us that the current US recover (I can barely manage to type that without scare quotes and I *hate* scare quotes) has been horrible for two reasons: low government purchases of goods and services (G) and low housing investment. Consumption, fixed non residential investment, and inventory investment have recovered normally. Net exports didn’t fall.

Angry Bear » Half of What’s Wrong With the Recovery in One Chart

Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4% from 2009 to 2012. Hence, the top 1% captured 95% of the income gains in the first three years of the recovery.

One percent recovery: 95 percent of gains have gone to the top one percent.

First-time homebuyers hurt by rising prices and tougher credit standards are disappearing from the market, slowing the pace of the three-year recovery. The decline of these buyers, many of whom are young and non-white, also threatens to widen the wealth gap between owners, who benefit from appreciation, and renters, said Thomas Lawler, a former Fannie Mae economist.

Americans Shut Out of Home Market Threaten Recovery: Mortgages - Bloomberg

Jenkins and O’Malley are at opposite ends of a dynamic that is pushing those with college degrees down into competition with high-school graduates for low-wage jobs that don’t require college.

College Grads Taking Low-Wage Jobs Displace Less Educated - Bloomberg

[ArtM72]

Sometimes I wish this website would allow grading of posts. This is one that should be mandatory reading.

Is the rise of the stock market over the past 4 years a primary or secondary correlation to the 1% observation?

[admin]

Well, the record stock market isn't so surprising:

• - Record profits
• - Record corporate cash positions
• - Record share buy-backs
• - Record low interest rates

However, most of it is bottom line growth, not topline growth. For that, we need business investment to pick up, but there could be a bit of a problem there:

And the US economy becomes ever less capital intensive due to the ongoing shift from manufacturing to services, bigger parts of it become like Wal-Mart. Fairly low tech, not growing much (if at all), hugely profitable, but mostly at the expense of squeezing cost and wages, and shifting much of the proceeds to shareholders. And, most importantly, this way is locking the economy in a low growth equilibrium.

The Wal-Mart Economy [Wal-Mart Stores, Inc.] - Seeking Alpha

[admin]

In a post credit bubble delevering phase, wages will continue to be the foremost driver of consumer spending growth. In fact the correlation between real wage growth and consumption this cycle has been a stunningly high 95% compared to a historical relationship closer to 60% (and just 12% last cycle).

We knew this day would co… wait never mind the day hasn’t come yet | FT Alphaville