The Washington Post‘s Wonkblog has a hopeful headline (5/28/13):
The Economy Is Holding Up
in a Year of Austerity
And a version of this piece landed on the front page of the Post‘s print edition, under the headline “Economy Shows Some Endurance.”
And here’s the good news in a nutshell:
Americans with higher incomes are wealthier thanks to the stock market’s 16 percent rise so far in 2013. Middle-income earners, whose assets are disproportionately tied up in their homes, are becoming wealthier thanks to higher housing prices–up 10.2 percent in 20 major cities in the year that ended in March, according to the S&P/Case-Shiller home price index released Tuesday.
And lower- and middle-income consumers have benefited from falling gasoline prices.
Hmm. You may notice, just looking at this, that the benefits for “middle-income earners” and “lower- and middle-income consumers” are also going to “Americans with higher incomes.” After all, the wealthy also live in homes and buy gas (or have their chauffeurs buy it for them). So the implications that the benefits of the economy are being distributed across the board is, on the face of it, dubious.
When you look into the numbers, it looks more dubious still. The average U.S. household spends about 4 percent of its gross income on gasoline–so you’d need a pretty dramatic change in gas prices to have an appreciable impact on a typical family’s finances. In fact, they’re down roughly 15 percent from their peak earlier this year, but they’re still about 15 percent more than the low they hit around this time last year–and if you look at gas prices over the past couple of years, they’ve bounced up and down without really going anywhere.
As gas prices are only one component of a household budget, you can get a better sense of how prices are affecting consumers by looking at overall inflation–and there you see that prices are generally pretty stable. Which is good news, but not really comparable to having your stock portfolio go up by 16 percent over five months.
But expenses, of course, is only half of a household’s budget–the other half being income. And that half, for the working class, is holding up unsurprisingly poorly in a year of austerity: According to the Bureau of Labor Statistics, the average weekly U.S. wage decreased by 1.1 percent over the most recent annual period. (That’s not adjusted for inflation, so the real decline in spending power is slightly greater.)
So, a more realistic view of the U.S. economy would be: If you own stocks, stock prices are going up. If you own a home, home prices are going up. And if you work for a living, wages are going down. Maybe that deserves a different headline.