Critics of the Bush tax cuts used to complain that America had a so‐called jobless recovery. That’s no longer a tenable assertion, so now they argue that wages are stagnant or that people don’t save enough.
The Wall Street Journal certainly does not give credence to any of these claims:
[T]he current expansion was derided right through 2004 as a “jobless recovery.” We now know the economy has created 7.4 million new jobs since mid‐2003, as revisions by the Bureau of Labor Statistics have added hundreds of thousands to its original monthly estimates. Thus the hand‐wringers have had no choice but to move on, turning their laments to allegedly “stagnant wages.” Well, that’s now vanishing too.As for real (inflation‐adjusted) wage growth, it averaged 0.6% annually for non‐farm workers in the first half of the 1990s compared with 1.5% a year so far in this decade. “This cycle as a whole has witnessed twice the average real wage growth than the first 64 months of the previous expansion,” Mr. Darda writes. For the last 12 months, real wages have risen even faster, at a 1.7% clip.So moving right along, this week’s bad news is said to be the U.S. “savings rate,” which according to the official measure was “negative” for a whole calendar year for the first time “since the Great Depression,” as Martin Crutsinger of the Associated Press helpfully put it.As a statistic, however, the official “savings rate” is nearly as useless a guide to prosperity as the trade deficit. In the government accounts, what is called the savings rate is literally income less consumption. But the government defines income too narrowly and consumption broadly. For example, “income” doesn’t measure capital gains (whether realized or not), the rising value of your home, or even increases in your retirement accounts.…[T]hese columns long ago began to watch a far more instructive figure known as “household net worth.” That number, released by the Federal Reserve, includes all assets (tangible and financial) held by individuals less their liabilities (mortgage and other debt). At the end of last year’s third quarter, U.S. household net worth had climbed to $54.1 trillion. That was an increase of more than $3 trillion over the previous four quarters.