This week, the CURMUDGEON has decided to ignore the
market noise. In particular, the USA Today cover story “Bull Run
Gets Solid Footing," consensus that the Fed will taper QE at their
September meeting, rising intermediate and long term interest rates,
Japan stock market decline, Hindenburg cross, sudden U.S. market selloff in
last hour of trading on Friday, etc.
Instead we focus on Main Street, which has NOT
participated in the so called "economic recovery" after the great
recession officially ended in June 2009.
1. Let’s first look at declining disposal
income, which dropped at an 8.4 percent annualized rate
(adjusted for inflation) from January through March 2013, compared with
an estimated 5.3 percent decrease. This was the biggest decline
since the third quarter of 2008. Real per capita disposable income is
now at a level below where it was two years ago – confirming the consumer is
getting pinched hard by payroll tax increase, low wages, and increased
prices for gas, food, and other necessities.
Friday, May 31st WSJ - Ahead of the Tape
column hit the nail on the head:
"The 3.3% growth in disposable personal income was
the lowest since such records began in 1959, excluding the 2009 swoon.
Stripping out December's surge in dividends and bonuses ahead of January's
tax increases, income rose by a little less than 3% in 2012. This year
is on track to be even slower.
Over the past five years through March, disposable
personal income has risen 10.5% in total. That is the worst pace on
record, reflecting not just a nasty recession but a lackluster
recovery. And it gets worse. Compensation from jobs increased only
8.2%, while investment income actually shrank 13.2% as the Federal
Reserve's bond-buying programs squeezed those relying on interest payments.
Offsetting this has been a 35.3% surge in government payments such as
Social Security and unemployment benefits."
2. Next, we examine the Declining
Labor Share of Income:
The declining labor share of overall national income is
one of the most striking trends of our time. Tali
Kristal in the American Sociological Review, argues that the decline was
in sectors with a large labor union presence.
3. Finally, we quote from a book review that
highlights the ever increasing wealth inequality in America
Book Review: A Nation, Its Seams Fraying - ‘The Unwinding,’ by George
The Unwinding” begins like a horror novel, which in some
regards it is. “No one can say when the unwinding began,” Mr. Packer
writes, “when the coil that held Americans together in its secure and
sometimes stifling grip first gave way.”
If you were born after 1960, Mr. Packer suggests, you
have spent much of your life watching structures long in place collapsing
— things like farms, factories, subdivisions and public schools on the one
hand, and “ways and means in Washington caucus rooms, taboos on New York
trading desks” and “manners and morals everywhere” on the other.
What has replaced them, he says,
is organized money, as well as a society in which “winners
win bigger than ever, floating away like bloated dirigibles, and losers have
a long way to fall before they hit bottom, and sometimes they never do.”
If a solitary fact can stand in for Mr. Packer’s
arguments in “The Unwinding,” it is probably this one, about the heirs to
Walton’s Wal-Mart fortune: “Eventually six of the surviving Waltons,” the author writes, “would have as much money
as the bottom 30 percent of Americans.”