January 19, 2020

Economix Blog: Household Income Stagnates, Again



Dollars to doughnuts.

Inflation-adjusted median annual household income was more or less flat in October, stuck at $51,378.

That figure comes from Sentier Research’s analysis of the government’s Current Population Survey data, which is charted below. Gray areas indicate periods of official recession (which economists define as when the economy is actively shrinking, as opposed to growing).

Source: Sentier Research. Gray areas indicate period of economic contraction. Source: Sentier Research. Gray areas indicate period of economic contraction.

Annual median household income has been circling around the $51,000 mark for about two years, even though the recession officially ended more than three years ago. In fact, October’s median household income measure was 4.7 percent lower than its counterpart of $53,937 in June 2009, the official end of the Great Recession. Labor market measures usually trail other economic indicators (like manufacturing orders or some other categories of business spending), but measures of the job market and workers’ incomes have been particularly atrocious in this recovery.

As you can see in the chart, incomes were relatively stagnant during the last expansion, too, indicating that flat living standards may have deeper causes than just the most recent business cycle.

Article source: http://economix.blogs.nytimes.com/2012/11/26/household-income-stagnates-again/?partner=rss&emc=rss

Economix Blog: Lean on Me: Trust and Friendship Around the World

Among the many reasons Americans are lucky is that they tend to have people they can depend on.

That is one of the takeaways from a recent report from the Organization for Economic Cooperation and Development, which in part looked at social relationships and trust around the developed world. Here is a chart showing the share of a country’s population that say they have relatives or friends they can count on for help in times of need:

DESCRIPTIONNote: Data refer to 2008 for Iceland and Norway; and to 2009 for Estonia, Israel, Switzerland and South Africa. Data from Gallup World Poll and Organization for Economic Cooperation and Development.

The United States is in the middle of the pack of the countries surveyed, with 92.3 percent of Americans saying they have a support network. Compare this to a country like India, where only 59.3 percent of people say they have a network they can depend on in times of need.



Dollars to doughnuts.

Having friends and family you can lean on is particularly important for those who are more likely to need support from time to time — that is, lower-income people.

Unfortunately, the O.E.C.D. found that people with lower incomes and less education were least likely to have a personal social safety net:

DESCRIPTIONSource: Gallup World Poll and Organization for Economic Cooperation and Development.

Perhaps partly because they generally have good support networks, Americans are slightly more trusting than residents of other countries; 36.6 percent of Americans agreed that “most people can be trusted,” compared with 33 percent across the developed world.

But distrust reigns when it comes to opinions of some of their most prominent institutions.

Just 30.1 percent of Americans have a “high level of trust” in the media, compared to an O.E.C.D. average of 40.4 percent. Even China, where news organizations are state-run, somehow managed to have higher trust in the media (54.6 percent). The same is true in Mexico (52 percent), where journalists reportedly self-censor to avoid angering the drug cartels.

DESCRIPTIONData refer to 2009 for Estonia, Israel, Switzerland and South Africa; and to 2008 for Iceland and Norway. Data regarding trust in the national government is not available for China. The value for the O.E.C.D. is an average of O.E.C.D. countries for which data are available in the latest wave of the survey. Source: Gallup World Poll and the Organization for Economic Cooperation and Development.

Americans are also slightly less likely than other developed countries to say they have a high level of trust in their national government, yet somewhat more likely to trust in their own country’s judicial system.

Article source: http://feeds.nytimes.com/click.phdo?i=0695b3fbe9c0fcc614ff656bba3ae652

Bucks Blog: Need to Save Money? Move In With Relatives

Here’s a way to save money: Move in with relatives.


Lots of Americans have done just that during the economic downturn, an analysis of census data from the Pew Research Center finds.

In fact, the trend helped touch off the largest increase in the number of Americans living in multigenerational households in modern history, the report says. From 2007 to 2009, the total spiked to 51.4 million, from 46.5 million. Such households might include a couple and their parents or in-laws, adult children, younger children and grandchildren.

The unemployed, whose numbers are growing, are much more likely to live in multigenerational households — 25.4 percent did in 2009, compared with 15.7 percent of those with jobs.

Living in mixed-generation households appears to be keeping many out of poverty. Although their adjusted incomes over all are lower, Pew found, the poverty rate among people in multigenerational households is substantially smaller than the rate for those in other households — 11.5 percent in the mixed-generation households in 2009 versus 14.6 percent in other types of households.

Plus, the potential benefits of such living arrangements are the greatest for groups that have been most affected by the recession. Among the unemployed, the poverty rate in 2009 was 17.5 percent for those living in multigenerational households, compared with 30.3 percent for those living in other households.

Members of other economically vulnerable groups — young adults, Hispanics and blacks — who live in multigenerational households also experience sharply lower poverty rates than those in other households.

Have you ever lived with relatives? Did it help you save money?

Article source: http://feeds.nytimes.com/click.phdo?i=a3452a4212ce7e7bb2b9933c56c7c228

Obama Would Accept Surtax on Incomes Over $1 Million

“I’m fine with the approach they have taken,” Mr. Obama said when asked at a news conference about the tax proposal put forth by Senate Democrats to cover the $445 billion cost of a jobs proposal that the Senate is expected to take up soon. The bill would, among other features, seek to stimulate the economy by lowering payroll taxes on workers and employers.

Mr. Obama, who previously had suggested paying for the jobs bill by limiting the value of deductions taken by households earning more than $250,000 a year, said the alternative offered by Senate Democrats would also meet his objective of “asking millionaires and billionaires to pay their fair share.”

He said Congress would still have to make other changes to the tax code as part of a broader program to reduce the deficit over the next 10 years, in keeping with the debt agreement reached this summer.

But while he pounded away at his Congressional opposition to explain why they opposed the Democratic plan, the essence of the latest proposal contained the same kernel that Republicans have denounced before: it would distribute a quick and significant tax cut to the many, to be paid back over the years by the few.

His news conference, which lasted more than an hour, was the latest in a series of appearances intended to keep the pressure on Congress to act on proposals that face fierce Republican opposition, but that even if never enacted seem destined to form the core dispute of the election campaigns for Congress and the White House in 2012.

“We will just keep on going at it and hammering away until something gets done,” Mr. Obama said at the close of the news conference. “And I would love nothing more than to see Congress act so aggressively that I can’t campaign against them as a do-nothing Congress.”

Senator Mitch McConnell of Kentucky, the Republican leader, said in remarks issued on Thursday that “what this week has shown, beyond any doubt, is that Democrats would rather talk about partisan legislation that they know won’t pass than about actually passing legislation we know would create jobs.”

“With 14 million Americans out of work, this is completely unacceptable,” he said. “We’re wasting valuable time.”

New monthly data on unemployment is to be released Friday morning, and with protesters on the streets of Washington in sympathy with those who have been marching on Wall Street, the political worries over the state of the economy were unmistakable.

Mr. Obama said that independent experts agreed with his own assessment, which boils down to this: “The economy needs a jolt right now.”

Mr. Obama said there is “no doubt” that the American economy is weaker now than it was at the beginning of 2011, and he called for the Senate to pass his jobs act when it takes up the measure next week, saying the bill will help protect the United States if the European debt crisis creates further turmoil in the global economy.

“The economy is just too fragile to let politics get in the way of action,” Mr. Obama said in remarks before he took questions from reporters in the White House East Room.

“This is not a game,” the president said, “The problems Europe is having right now could have a very real effect on our economy.” He said that the jobs bill “could help guard against a downturn if the situation in Europe gets any worse.”

Mr. Obama blamed the economy’s weakness on the downturn in Europe, slow job growth and what he called the “debacle” of this summer’s debt ceiling negotiations.

Mr. Obama has been traveling the country to push his jobs plan, and he has been far more aggressive about challenging Republicans to “explain,” as he said on Thursday, “why they would be opposed to common-sense ideas” that he said had bipartisan support in the past.

Mr. Obama also talked about the Occupy Wall Street protests that have been gaining strength in recent days. “Americans understand that not everybody has been following the rules,” he said. “These days a lot of folks that are doing the right thing aren’t rewarded, and a lot of folks who aren’t doing the right thing are rewarded.”

He expressed solidarity with some of the protesters, saying that they were “giving voice to a more broad-based frustration about how our financial system works.”

Mr. Obama did not say whether he would veto a bill currently before the Senate that accuses China of manipulating its currency. He said that “it is indisputable that they intervene heavily in the currency markets,” but added that the United States has to make sure that whatever steps it takes against China will be upheld by the World Trade Organization.

Mr. Obama defended his administration’s handling of a federal loan guarantee for Solyndra, the solar equipment manufacturer that declared bankruptcy last month after borrowing $528 million with the government’s backing. He said that the loan program to companies like Solyndra predated his time in office, but added, in response to a question from a reporter, that “the process by which the decision was made was on the merits. It was straightforward.”

He said that “of course there were going to be debates internally when you’re dealing with something as complicated as this,” an apparent reference to e-mails that have surfaced that showed that administration officials had questioned the company’s financial viability.

Article source: http://www.nytimes.com/2011/10/07/us/politics/obama-says-he-would-accept-a-surtax-on-high-incomes.html?partner=rss&emc=rss

U.S. Consumer Spending Rises, but Incomes Fall

Opinion »

Op-Ed: Liberated, but They Have to Live There

Our legacy from the war in Iraq will be written in the lives of the people we have left behind.

Article source: http://feeds.nytimes.com/click.phdo?i=611a195a97ead44c0752a0a93d9db55a

Bucks Blog: The Industry With the Most Steadfast Retirement Savers

What is it about utility workers? They apparently are among the country’s most dedicated retirement savers, according to new research from Vanguard.

Larger numbers of employees of small utility companies tend to save more in their 401(k) plans than workers in many other industries, the study found. Those at utility firms with fewer than 1,000 employees had a 92 percent participation rate. (Employees at large mining companies followed, with an 88 percent participation rate.) Vanguard plans as a whole had a 74 percent average participation rate.

On average, participants in the plans of both small and large utilities saved a higher percentage of their incomes, too: their 9 percent and 8.2 percent average contribution rates, respectively, surpassed the 6.8 percent average rate for Vanguard plans over all.

The study did not delve into the details of why certain industries were better than others at signing up employees and encouraging them to save. But longer-term employees in profitable industries tend to save more in general. And it may also be that some lines of work attract people who are inclined to be better long-term planners.

Utilities, for instance, tend to have workers who can map out gas production for the next 20 years. They may also apply those skills to their own retirement-saving efforts. “Utilities have engineers, armed with their spreadsheets,” said Steve Utkus, head of Vanguard’s Center for Retirement Research.

The industry studies are part of Vanguard’s annual How America Saves report, which examined overall patterns of more than three million participants in plans administered by Vanguard.

The report notes that overall plan participation dropped a bit, as the tough economy canceled out increases in participation due to automatic enrollment. (The report was released before the most recent stock market turmoil.)

Do Vanguard’s numbers on your industry surprise you?

Article source: http://feeds.nytimes.com/click.phdo?i=804d59e513130bbfb3d5e74b153be0be

Second Recession in U.S. Could Be Worse Than First

If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around.

Given the tumult of the Great Recession, this may be hard to believe. But the economy is much weaker than it was at the outset of the last recession in December 2007, with most major measures of economic health — including jobs, incomes, output and industrial production — worse today than they were back then. And growth has been so weak that almost no ground has been recouped, even though a recovery technically started in June 2009.

“It would be disastrous if we entered into a recession at this stage, given that we haven’t yet made up for the last recession,” said Conrad DeQuadros, senior economist at RDQ Economics.

When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut from the bone. Making things worse, policy makers used most of the economic tools at their disposal to combat the last recession, and have few options available.

Anxiety and uncertainty have increased in the last few days after the decision by Standard Poor’s to downgrade the country’s credit rating and as Europe continues its desperate attempt to stem its debt crisis.

President Obama acknowledged the challenge in his Saturday radio and Internet address, saying the country’s “urgent mission” now was to expand the economy and create jobs. And Treasury Secretary Timothy F. Geithner said in an interview on CNBC on Sunday that the United States had “a lot of work to do” because of its “long-term and unsustainable fiscal position.”

But he added, “I have enormous confidence in the basic regenerative capacity of the American economy and the American people.”

Still, the numbers are daunting. In the four years since the recession began, the civilian working-age population has grown by about 3 percent. If the economy were healthy, the number of jobs would have grown at least the same amount.

Instead, the number of jobs has shrunk. Today the economy has 5 percent fewer jobs — or 6.8 million — than it had before the last recession began. The unemployment rate was 5 percent then, compared with 9.1 percent today.

Even those Americans who are working are generally working less; the typical private sector worker has a shorter workweek today than four years ago.

Employers shed all the extra work shifts and weak or extraneous employees that they could during the last recession. As shown by unusually strong productivity gains, companies are now squeezing as much work as they can from their newly “lean and mean” work forces. Should a recession return, it is not clear how many additional workers businesses could lay off and still manage to function.

With fewer jobs and fewer hours logged, there is less income for households to spend, creating a huge obstacle for a consumer-driven economy.

Adjusted for inflation, personal income is down 4 percent, not counting payments from the government for things like unemployment benefits. Income levels are low, and moving in the wrong direction: private wage and salary income actually fell in June, the last month for which data was available.

Consumer spending, along with housing, usually drives a recovery. But with incomes so weak, spending is only barely where it was when the recession began. If the economy were healthy, total consumer spending would be higher because of population growth.

And with construction nearly nonexistent and home prices down 24 percent since December 2007, the country does not have a buffer in housing to fall back on.

Of all the major economic indicators, industrial production — as tracked by the Federal Reserve — is by far the worst off. The Fed’s index of this activity is nearly 8 percent below its level in December 2007.

Likewise, and perhaps most worrisome, is the track record for the country’s overall output. According to newly revised data from the Commerce Department, the economy is smaller today than it was when the recession began, despite (or rather, because of) the feeble growth in the last couple of years.

If the economy were healthy, it would be much bigger than it was four years ago. Economists refer to the difference between where the economy is and where it could be if it met its full potential as the “output gap.” Menzie Chinn, an economics professor at the University of Wisconsin, has estimated that the economy was about 7 percent smaller than its potential at the beginning of this year.

Unlike during the first downturn, there would be few policy remedies available if the economy were to revert back into recession.

Article source: http://feeds.nytimes.com/click.phdo?i=a0d93ce0d93ec9a2d7c1c44b1eaeff9b

Spending Fell and Income Barely Rose in June

WASHINGTON — Americans cut back on spending in June for the first time in nearly two years, and their incomes grew by the smallest amount in nine months, troubling signs in a barely growing economy.

The Commerce Department said in a report released on Tuesday that consumer spending dropped 0.2 percent in June. Some of the decline was caused by declining food and energy prices, which had spiked in recent months. When excluding those items, consumer spending was flat.

Income rose 0.1 percent, the weakest showing since September, reflecting anemic hiring this spring, while the personal savings rate rose to 5.4 percent of after-tax incomes, the highest level since August 2010.

The data highlighted that consumer spending weakened during the April-June quarter, which could mean the sluggish economy is worsening. Consumer spending is closely watched because it accounts for 70 percent of domestic economic activity.

“The recent run of weak economic news has made us more concerned that any rebound will be more modest than previously looked likely,” said Paul Dales, senior United States economist at Capital Economics.

High gas prices and unemployment have squeezed household budgets this spring, leading to tepid overall economic growth in the April-June quarter. The economy expanded at an annual rate of 1.3 percent in the second quarter after only 0.4 percent growth in the first three months of the year. The combined growth for the first six months was the worst since the recession ended two years ago.

Many Americans are cutting back on purchases of cars, furniture, appliances and electronics. Employers have responded by reducing hiring. The economy added just 18,000 net jobs in June, the fewest in nine months. The unemployment rate rose to 9.2 percent, the highest level this year.

The government is to issue its employment report for July on Friday.

The biggest drop in spending occurred in items like food and gasoline. Spending on such non-durable goods fell 5.5 percent, reflecting price declines after increases early this year. An inflation gauge tied to consumer spending dropped 0.2 percent in June, the biggest one-month decline since September 2009. Outside of food and energy, prices were up 0.1 percent.

Still, spending on durable goods, such as autos, also fell in June 1.1 percent. One reason for the decline may be the shortage of popular car models in showrooms. Supply chain disruptions caused by the March earthquake in Japan have limited production of auto and electronic parts.

Declining growth and rising unemployment have raised concerns that the country could fall back into a recession.

Many analysts were still hopeful that growth will rebound in the second half of the year, but the timing of any turnaround is hard to gauge. Manufacturers had their weakest growth in two years in July, according to the Institute for Supply Management.

And gasoline prices remain high, even after coming down from a peak of nearly $4 a gallon in early May. The average price for a gallon of regular unleaded was $3.70 on Tuesday — 14 cents higher than a month ago and almost a dollar more than in the same month last year.

Some economists have begun to trim their forecasts for the second half of the year. Capital Economics said it had cut its outlook for second-half growth to 2 percent from a previous forecast of 2.5 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=79baaef74d8b25140683d67f31ea6b3e

U.S. Consumer Spending Stalls as Wages Stagnate

Consumer spending was unchanged in May, the Commerce Department said, the flattest level since September 2009. And when adjusted for inflation, spending actually dropped 0.1 percent.

April’s consumer spending figures were revised to show a similar decline when adjusted for inflation. That represented the first declines in inflation-adjusted spending since January 2010.

Incomes rose 0.3 percent for the second consecutive month. But adjusted for inflation, after-tax incomes increased only 0.1 percent in May, after falling by the same amount in the previous month. By that measure, incomes have been essentially flat since the beginning of the year.

Slow wage growth hurts the broader economy because consumers have less money to spend. Consumer spending accounts for 70 percent of economic activity. Increases in gas prices have forced many consumers to cut back on discretionary purchases, such as furniture and vacations.

At the same time, fewer jobs and high unemployment leave workers with little leverage to ask for raises. The economy created only 54,000 jobs in May, the lowest amount in eight months. The unemployment rate rose to 9.1 percent last month.

The economy expanded at an annual rate of 1.9 percent in the January-March period. Many economists say they believe that growth is only slightly better in the current April-June period. Economists are optimistic for the second half of the year, saying growth should pick up to a 3.2 percent pace.

They note that two of the biggest factors slowing the economy are abating. Gas prices have eased since peaking in early May at a national average of nearly $4 a gallon, and American factories are expected to begin producing more once Japan’s factories resume more normal operations. The March 11 earthquake and tsunami in that country has led to a parts shortage, particularly for auto and electronics manufacturers.

Article source: http://feeds.nytimes.com/click.phdo?i=663b58ae7de3500dc923d57141e3c093

Higher Prices Eat Into Consumer Spending Gains

Consumer spending increased 0.4 percent in April for a 10th consecutive month of gains, the Commerce Department said on Friday, after rising 0.5 percent in March.

But prices rose 0.3 percent, leaving spending up just 0.1 percent and incomes stagnant when adjusted for inflation.

Tornadoes and floods, which lashed parts of the country last month, were blamed in part for an 11.6 percent decline in contracts to buy previously owned homes last month.

“We see the soft patch of the first quarter bleeding, at least, into the first half of the second quarter,” said Robert Dye, senior economist at PNC Financial Services in Pittsburgh.

“We will see again a consumer that can keep pace with the economy, but cannot drive the economy forward.”

Recent data including retail sales and industrial output have been soft, prompting economists to lower their growth forecasts for the second quarter. Further cuts are likely next week should May auto sales come in very weak.

Second-quarter forecasts for the rate of growth in gross domestic product are ranging from 2.5 to 3 percent.

The government reported on Thursday that consumer spending — which accounts for about 70 percent of the nation’s economic activity — grew at a 2.2 percent annual rate in the first quarter, slowing from a 4 percent clip in the final three months of 2010.

That contributed to holding back overall economic growth to a 1.8 percent rate during the quarter after a 3.1 percent rate in the October-December period.

With much of the slowdown attributed to what United States policy makers see as temporary factors, like high commodity prices and supply chain disruptions because of the earthquake in Japan, the Federal Reserve is not expected to worry too much about the rate of recovery.

The central bank is expected to keep interest rates low after it wraps up its $600 billion government bond-buying program in June before it starts looking at ways to withdraw some of the stimulus it has lent the economy.

The high gasoline prices swallowed almost all the increase in incomes from tax cuts enacted in December.

Economists worry that stagnant incomes, which have failed to keep up with inflation, will continue to impede spending even though fuel prices are starting to fall.

So far, consumers have resorted to saving less, and some are tapping into their savings to maintain spending. Incomes rose 0.4 percent last month, but disposable incomes adjusted for inflation were flat for a second consecutive month.

Real incomes have not grown this year and the saving rate stayed at a two-and-a-half-year low of 4.9 percent in April. According to the Commerce Department’s chief economist, Mark Doms, Americans saved $82 less over the last four months.

The retreating price for gasoline helped to lift consumer spirits this month and lower their inflation expectations.

The final version of the Thomson Reuters/University of Michigan consumer sentiment survey showed sentiment among Americans rose this month to 74.3, from 72.4 in the preliminary May reading.

High gasoline prices pushed up the year-on-year inflation rate to 2.2 percent, the biggest rise in a year, after increasing 1.8 percent in March.

Excluding food and energy, prices increased 1 percent, the largest gain since September, after rising 0.9 percent in March.

Article source: http://feeds.nytimes.com/click.phdo?i=6295edae5aa7026a206500befc7e6dc2