Monday Report
Stuck in the middle November 3, 2008

Utah and Regional Median Wages - Stuck at the bottom!





Stuck in the middle

"After median wages stagnated throughout the Bush years while top earners benefited most, those feeling the pinch will go to the ballot box in a disgruntled mood" - Financial Times, London
  • In the closing stages of the US presidential campaign, John McCain has been pushing hard on the idea that Barack Obama would "spread the wealth around" - as the Democratic candidate this month reportedly told the voter who came to be known as Joe the Plumber. "That is what change means for Barack the Redistributor," said Mr McCain on Monday. "It means taking your money and giving it to someone else." The Republican nominee's sounding of the alarm resonates with portions of the US electorate, although it has probably come too late to be a game changer. But much larger sections of voters - those living in the bottom 80 per cent - have been experiencing a means of wealth redistribution in the past few years that has led many of them to different conclusions.
  • This kind of redistribution is of a different complexion to the progressive taxation that Mr Obama supports and which Mr McCain apparently no longer does. It has come via the mechanism of the market and has shifted wealth in the opposite direction - from the middle classes to the wealthy. It long predates the collapse of the subprime mortgage market last year that lit the fuse for today's global financial crisis.
  • Economists call it median wage stagnation. Others dub it the "silent recession". Mr Obama, who has struggled since the start of his campaign to speak in an economic language that strikes a chord with blue-collar voters, recently put it this way: "We are now being battered by a very serious economic storm and for many Americans it has only deepened the quiet storms they have been struggling through for years."
  • At this stage, the impact of the financial meltdown on the longer-term structural problem of income stagnation can only be guessed at - although it is highly unlikely to improve the situation for most American households. But the political effect has been apparent for some time.
  • In spite of the prominent role played by the unpopular Iraq war in the outcome of the 2006 midterm elections, anxieties about the economy had a greater influence on the result. According to exit polls, more voters listed concerns related to the economy than listed Iraq in an election that restored Democratic control of both houses of Congress for the first time in 12 years. Since then, voter anxiety has only increased.
  • In 2006, almost 70 per cent of American voters said their country was on the wrong track. Now, more than 90 per cent do. Then, a narrow majority believed their children would be worse off than they are - an astoundingly bleak sentiment for a country built on optimism. Now, a clear majority say so. For most Americans, the financial meltdown is only the cherry on a very familiar cake.
  • "You have to question whether conventional measures of economic growth mean anything when most people's incomes have either been stagnating or declining for many years," says Jared Bernstein, an economist at the liberal Economic Policy Institute and an adviser to Mr Obama. "The fact that wage earners are no longer getting the benefits of their improving productivity in the workplace is something we have never experienced [before] in modern America."
  • The data are stark and go some way towards explaining why so many Americans felt so disaffected even during the most robust years of economic growth under the Bush administration. Between 2000 and 2006, the US economy expanded by 18 per cent, whereas real income for the median working household dropped by 1.1 per cent in real terms, or about $2,000 (1,280, Eu1,600). Meanwhile, the top tenth saw an improvement of 32 per cent in their incomes, the top 1 per cent a rise of 203 per cent and the top 0.1 per cent a gain of 425 per cent.
  • Part of this was because the latest period of economic growth failed to create jobs at nearly the same rate as in previous business cycles and even led to a decline in the number of hours worked for most employees. Unusually for a time of expansion, the number of participants in the labour force also fell. But mostly it was because the fruits of economic growth and soaring productivity rates went to the highest income earners.
  • Economists such as Lawrence Summers, who was President Bill Clinton's last Treasury secretary and is tipped by some to return to that role in an Obama administration, say the income stagnation crisis is America's most troubling long-term economic problem.
  • In contrast to the Clinton years - when there was some growth in median income, although still at lower rates than productivity growth - people such as Mr Summers and Robert Rubin, his predecessor, are now openly sceptical of the market economy's ability to distribute socially desirable rewards.
  • "It is critically important that the next administration makes it a priority to focus on the structural causes that hold back growth in workers' wages," says Mr Summers. "That means reversing the perverse Bush tax cuts, empowering labour in strategic ways, as well as investing in healthcare, education and infrastructure."
  • But Mr Summers, along with many of his peers, concedes that finding the right policies will prove difficult for such a complex and deep-seated problem. Many reach for parallels with the "gilded age" of the 1920s that gave rise to unprecedented Great Gatsby- style incomes at the top and was brought to a close by the 1929 stock market crash and the ensuing Great Depression.
  • Today's numbers also closely track that period. According to Emmanuel Saez at the University of California, Berkeley, the distribution of income today almost exactly matches that of 1928 on the eve of the Wall Street crash. In 1928, the top 1 per cent of Americans took in 24 per cent of national income, compared with 23 per cent today. Between 1940 and 1984 their share never exceeded 15 per cent and it was in single digits for most of the 1960s and 1970s.
  • At the close of the gilded age, voters were also in a restless mood. Then, as now, policymakers are torn between balancing the budget and investing in public works through deficit-funded stimulus spending. The Obama campaign informally estimates that next year's budget deficit could go as high as $900bn - twice this year's fiscal gap.
  • Some in the Obama camp believe in returning in the short-term to fiscal discipline. Others are embracing the countercyclical spending recommendations of John Maynard Keynes. That debate appears yet to be settled.
  • "Franklin Roosevelt actually tried to balance the budget in the mid-1930s and it is safe to say it was not his finest hour," says Douglas Elmendorf, head of the Hamilton Project, a non-partisan think-tank that addresses median wage stagnation. "I would say this is the worst economic problem America has faced since at least the recession of the early 1980s but, in retrospect, median wage stagnation is a far more difficult and complex problem to address."
  • That is one reason why the term "median wage stagnation" has not cropped up on the campaign trail: it does not fit on a bumper sticker. Nevertheless, the economic squeeze that has fuelled so much anguish among voters is creating all sorts of difficulties for Republican candidates in the least expected of states. Republican senators seeking re-election in Georgia (see below), North Carolina and Virginia, for example, are vulnerable to being unseated next week.
  • But perhaps the biggest change is in intellectual fashion, which is still in the early stages of a big change. Last week, Alan Greenspan, once the toast of the economic world, admitted that he was mistaken about the benign effects of financial deregulation. Yet for years the former Federal Reserve chairman has been warning of the unsavoury impact the combination of widening income inequality and income stagnation could have on a democratic society.
  • Mr Bernstein, who has been focusing on income stagnation for more than 20 years, says that alarm about the problem has finally gone mainstream. "I remember giving a presentation to Bob Rubin in the early 1990s and he was concerned about it but nothing more," he says. "Now he pays very, very close attention to the problem. It can no longer be ignored."

The Financial Times Limited 2008, London

  • Utah and Regional Median Wages - Stuck at the bottom!
  • Regional Median Wages by State 2000 & 2007

    StateMedian Wage 2000Median Wage 2007Average Annual % GrowthState Rank
    Wyoming 13.88 15.63 1.7 1
    Montana 12.64 13.82 1.3 3
    New Mexico 13.88 15.13 1.2 7
    Idaho 13.97 14.87 0.9 14
    Nevada 14.57 15.48 0.9 16
    Arizona 15.05 15.40 0.3 29
    Oregon 15.31 15.45 0.1 35
    Colorado 17.47 17.50 0.0 36
    United States 15.65 16.00 0.3
    Utah 15.05 15.00 0.0 39

    Sources: Joint Economic Committee analysis of the Bureau of Labor Statistics Local Area Unemployment Statistics (LAUS) program data and Center for Economic and Policy Research analysis of the Bureau of Labor Statistics Current Population Survey Outgoing Rotation Group Files

    • World Business Confidence
    • Business sentiment stabilized last week near the record low set the week before. Negative responses to the nine questions posed in the survey measurably outnumber the positive ones. Sentiment is extraordinarily negative in North America and Europe and measurably weaker in Asia and South America. Hiring intentions fell again to another new low, consistent with monthly job losses in the U.S. of well over 150,000. Assessments regarding the economy more broadly and the outlook six months hence remain bleak. The financial panic that began in early September has been a body blow to global business confidence, and thus the global economy, which according to the survey is now in recession.
    • The Conference Board Consumer Confidence
    • The Conference Board index of consumer confidence tumbled in October to 38 from September's 61.4 (upwardly revised from 59.8). The expectations component of the index fell the most, dropping to 35.5 from 61.5. The present situation fell to 41.9 from 61.1. Assessments of labor market conditions fell sharply, especially the expectations for future jobs. This puts the index at its lowest level on record back to 1969, by more than 5 points.
    • ABC News/Washington Post Consumer Comfort Index
    • Confidence edged higher this week, despite financial market and economic turmoil. According to the ABC News/Washington Post consumer confidence index, sentiment gained 1 point to -49 for the week ended October 26. Despite the slight easing in consumer sentiment, the index remains at an extremely weak level.
    • GDP
    • Real GDP declined 0.3% in the third quarter at an annualized rate, slightly better than the consensus expectation for a 0.5% drop. This was down from growth of 2.8% in the second quarter, unchanged from last month. Over the past year, real GDP has increased 0.8%. Consumer spending, business investment, and investment in housing all fell from the second quarter to the third. Inventories, trade and government were all positives for growth. Final sales of gross domestic product, a measure of demand for U.S. goods and services, fell 0.8%. These data are another indication that the U.S. economy is in recession.
    • FOMC Monetary Policy
    • The Federal Open Market Committee lowered the fed funds target rate from 1.5% to 1%. This action follows an emergency 50-basis point cut in the target rate on October 8. The committee's statement said that economic activity has "slowed markedly" and cited weakness in consumer spending, business investment and exports. It also noted tight credit. The statement said that "downside risks to growth remain," an indication that more rate cuts could follow. The target rate was last at 1% in June 2004.
    • Durable Goods (Advance)
    • New orders for manufactured durable goods rose in September by 0.8%. This followed on the back of a 5.5% decline in August. The rise in orders was due to a nearly 30% increase in orders for nondefense aircraft. Orders excluding transportation were down 1.1% over the month and core capital goods orders fell 1.4%. Core goods shipments bounced back from August's decline, increasing 2% over the month.
    • Jobless Claims
    • Initial claims for unemployment insurance remained at 479,000 for the week ending October 25. This was in line with expectations. The latest figures likely have little to no relation to hurricanes Ike and Gustav, but remain on the high end of what has been seen this year. This indicates that the labor market is slackening quickly.
    • New-Home Sales (C25)
    • September new-home sales offer a glimmer of hope for housing, coming 2.7% above the August figure. At 464,000, however, the pace of sales remained dismally low. Months of supply of homes also fell, although it continued to take longer to sell a new home. The median sales price declined by 9%. Notwithstanding September's improvement, sales are likely to weaken again.
    • OFHEO Purchase-Only House Price Index
    • The monthly OFHEO purchase-only house price index fell by 0.6% from July to August and is now 5.9% below its August 2007 value. Since the house price index peaked in April 2007, the index has fallen by 6.5%. Prices declined for all census divisions except New England, which posted a slight monthly increase. The rate of decrease was slightly lower than in July, but there is still no indication that house prices have reached bottom yet for the U.S. as a whole.
    • Existing-Home Sales
    • Home sales surprised on the upside in September. The National Association of Realtors reported a 5.5% m/m increase in sales of existing homes. At 5.18 million annualized units, sales are running at their fastest pace since August 2007 and are up year over year for the first time in three years. Moreover, the decline in house prices, while still a substantial 9% y/y, is slightly better than last month's decline. The inventory situation is also improving, with months of supply slipping just below 10 for the first time since January. Before celebrating the end of the housing downturn, however, it is important to note that the improvement in sales comes on the back of a surge in foreclosure sales.
    • S&P/Case-Shiller Monthly Home Price Indices
    • Both the 10-city and 20-city composite S&P/Case- Shiller house price indices posted their greatest year- ago rates of decline on record in August. The 10- metro house price index decreased 17.7% from a year ago. The 20-metro index decreased 16.6%. On a month-ago basis, rates of decline were largely unchanged between July and August. In August, the 10-city composite fell by 1.1% and the 20-city composite fell by 1.0%
    • MBA Mortgage Applications Survey
    • In the week ending October 24, the MBA market index reversed its losses of the previous week and rose to 476.7. The market composite jumped 16.8%, pushed by increases in both the refinance and purchase indexes. The refinance index rose to 1,489.4, a 28.5% increase. The purchase index increased 8.5% to 303.1.
    • Chain Store Sales
    • Chain store sales rose 0.5% in the week ending October 25 as declining gasoline prices and cool weather supported store traffic, according to the ICSC. Year-over-year growth rose to 1.3%, very weak but the best performance in three weeks.
    • Oil and Gas Inventories
    • Crude oil inventories rose by 0.5 million barrels for the week ending October 24, according to the Energy Information Administration, falling short of expectations of a 1.6 million barrel build. Gasoline inventories fell by 1.5 million barrels, contradicting expectations of a 1.5 million barrel build. Distillate supplies rose by 2.3 million barrels, surpassing expectations of a 1.1 million barrel build. Refinery operating capacity improved to 85.3% from 84.8%. Total domestic petroleum demand was relatively unchanged from the prior week. This report should lend modest upward support to oil prices.
    • Natural Gas Storage Report
    • Working gas in underground storage increased by 46 billion cubic feet during the week ending October 24, above consensus expectations of a 41 bcf build.

    • Dress Barn
    • The Dress Barn, Inc. trades as dress barn at 830 locations nationwide.
    • The specialty apparel stores, offering quality career and casual apparel, occupy spaces of 7,000 sq.ft. to 8,000 sq.ft. in power, outlet, regional and community centers, in addition to metro downtown areas.
    • Growth opportunities are sought throughout the existing market during the coming 18 months.
    • Preferred cotenants include grocery stores, discount department stores, fashion anchored and soft goods retailers.
    • Preferred demographics include a population of 120,000 within a five-mile radius earning a minimum median household income of $45,000.
    • The company prefers to locate in inline spaces between two major anchors and in centers with a minimum GLA of 150,000 sq.ft.
    • For more information, contact
      • Elise Jaffe,
      • The Dress Barn, Inc.,
      • 30 Dunnigan Drive,
      • Suffern, NY 10901;
      • Web site:
    • Fatburger
    • Fatburger Corp. trades as Fatburger at 90 locations throughout AZ, CA, CO, FL, GA, LA, MI, NE, NJ, NV, NY, OH, PA, TX and WA.
    • The restaurants occupy spaces of 1,800 sq.ft. to 2,200 sq.ft. in freestanding locations.
    • Growth opportunities are sought nationwide during the coming 18 months.
    • For more information, contact
      • David Dale- Johnson,
      • Fatburger Corp.,
      • 301 Arizona Avenue, Suite 200,
      • Santa Monica, CA 90401;
      • Web site:
    • Great Wraps
    • Great Wraps operates 87 locations nationwide.
    • The sandwich shops occupy spaces of 1,500 sq.ft. to 1,800 sq.ft. in malls and lifestyle, power and strip centers, in addition to urban/downtown areas.
    • Growth opportunities are sought throughout select markets nationwide during the coming 18 months.
    • Typical leases run 10 years. A vanilla shell and specific improvements are required.
    • Preferred demographics include a population of 10,000 within one mile earning $35,000 as the average household income.
    • For more information, contact
      • Bob Solomon,
      • Great Wraps,
      • 4 Executive Park East, Suite 315,
      • Atlanta, GA 30329;
      • Web site:

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