Average Wage Growth Below 1% Again for 2016 ?

From 2000 to 2008, the Houston Chronicle reported that average wages grew from between 3.8% and 4.4% across the United States.

According to the Bureau of Labor Statistics Employment Situation reports, in the first four months of this year, the average weekly salaries rose just 2.6 tenths of a percent from $878.49 in January to $880.79 in April.  When annualized, this means that we are on track to have a wage growth of only 7.8 tenths of a percent over the next 12 months.  This less than 1% annualized growth, is just 20% of even the worst growth of 3.8% in the years from  2000 to 2008.

Once again, this proves that we are creating jobs and not increasing wages under the Obama administration.  I, for one, am tired of his constant touting of job growth.  As if having a job is more important that having one that pays well.  In 7 years, wages under  have only risen 7% or about 1% per year.  When you subtract the 27%+ increase for the top 1%, the bottom 99% had an average increase of only 4.3%. Raising the minimum wage in 29 states has not produced wage increases.  Nor has Obama's raising of the salaried overtime rule by double, produced higher wages.   Instead, low wage growth is indicative of how weak this economy is.  The proof of that came in the first quarter when Gross Domestic Product (GDP) only grew by 5 tenths of a percent; just one-eighth of the normal non-recessionary growth rate of 3.79% since 1790.  Assuming growth is still slack throughout the year, Obama is on track to have the fourth worst presidential average of just 1.55% growth in his 8 years in office.

References:

What Is an Appropriate Annual Salary Increase?: http://work.chron.com/appropriate-annual-salary-increase-16035.html

The Employment Situation - April 2016 - Bureau of Labor Statistics (Table B-3): http://www.bls.gov/news.release/pdf/empsit.pdf

The Employment Situation - January 2016 - Bureau of Labor Statistics (Table B-3): http://www.bls.gov/news.release/archives/empsit_02052016.pdf

Obama touts job growth, asks Congress to take action on tax evasion: http://www.usatoday.com/story/news/politics/2016/05/06/obama-economy-money-laundering/84017722/

State Minimum Wages | 2016 Minimum Wage by State:  http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx

Obama overtime rule could raise wages for 5 million: http://www.politico.com/story/2015/06/obama-overtime-rule-wage-raise-119566

U.S. economy slows, with GDP growing 0.5% in first quarter: https://www.washingtonpost.com/news/wonk/wp/2016/04/28/u-s-to-release-data-showing-gdp-growth-for-first-quarter/

Barack Obama's Sad Record on Economic Growth | RealClearMarkets: http://www.realclearmarkets.com/articles/2016/02/01/barack_obamas_sad_record_on_economic_growth_101987.html

State of the Union: Obama's Economy in 7 Charts - Fortune: http://fortune.com/2016/01/12/obama-economy-charts/ 

Why the Paris Climate Change Agreement Will Fail

In Paris, In mid-December, after two weeks of talks between 195 countries, ended with an agreement on climate change, there were high-fives and pats on the back for all those politicians, from all those countries that attended the summit.  The media called  it "historic".  CNN proclaimed "The End of Fossil Fuels", as if the world will somehow toss all their gasoline-powered cars to the wayside; commercial jets will find some way to fly without fuel; people will find something other than natural gas to heat their homes and cook their food with; and cement and steel will, I suppose, be created without high-carbon coke as fuel.  Also, somehow, we will figure out how to pave our roads without the asphalt that is a by-product of refining oil.  All before 2030, in order to keep the global temperatures from rising another 1/2 degree Celsius.

Of course, those items mentioned above, and many others, are just many of the impossible hurdles facing the Paris agreement.  Then, there's the toothlessness of the agreement itself.

• The agreeing parties will set their own goals and targets to reduce carbon and "do their best" to implement those reduction targets "as soon as possible".  
• Progress towards the stated targets/goals will be on the honor system with each country self-monitoring its own progress and self-reporting such progress.
• Those failing to meet their goals will be "named and shamed" and, supposedly, spat upon by the world community as a polluter; assuming that each country will honestly report their progress. 
• The 55 dirtiest countries will ante-up $100 billion a year to be handed over to the other 140 of the total 195 participating counties, so they too, can fight climate change.

There you have it; and I'm quite sure that last item was a real crowd pleaser among the 140 countries who are now licking their chops in anticipation of billions of dollars coming their way that will surely be used solely for fighting climate change.  More importantly, this agreement is like having no agreement at all.  Especially since most of the "politicians" involved probably won't be around over the next 15 years of initial commitments.  For sure, Obama and his people won't be around past February 2017 to insure that the U.S.'s progress toward our targets and goals will be met.

But, here's the two biggest reasons that the Paris agreement will fail:  (1) Growing populations and (2) Growing affluence in emerging economies.

Take India for example.  By 2028, India is expected to overtake China in total population.  Also, by 2030, a 2012 BP study projects that automobile ownership in India will grow from just 20% in 2011 to 65% by 2030.  That's just one country and a massive growth in affluence.  China will also see huge growth in automobile ownership; nearly 300% on a per capita basis by 2030. All told, there will be 2 billion cars on the world's roads just 5 years later in 2035; according to a Navigant Research study published last year.  That's a 66% increase in automobile ownership and a presumed growth in affluence in just 21 years.  So, with this in mind, every car sold going forward from today has to be more than 66% more fuel efficient just to keep automobile emissions the same as they are today.  If that's not an impossible task, I don't know what is.

However the growth in affluence doesn't just stop with the world buying more cars. Air travel demand is expected to double by 2035.  And, as a result, emissions from commercial aircraft will substantially increase unless fuel economies are at least halved.  Even so, most of today's aircraft will probably still be flying in 2035.  Just as improving automobile fuel inefficiencies is an impossible task, improving jet liner fuel efficiency would be even more difficult; especially when you consider that many of today's planes (and some cars) will still be operational for the next 15 to 20 years.

Simply, growing populations and even faster growth in affluence will be the downfall of the Paris agreement. The growth in affluence won't just be with cars and air travel.  It will be seen in all other forms of human activity.  There will be larger, better heated, and well lit homes with more electrical appliances, and highly unreliable wind and solar will not be able to keep up with the demand without the assistance of energy produced by fossil fuels.  So much for CNN's "End of Fossil Fuels" folly. Also, do we really think that building nuclear power plants is the solution?  The inherent problems and risks make the choice not a good one.  Just look at the Chernobyl and Fukushima disasters.

In my opinion, the Paris agreement is historic alright.  A historic failure!


References:

2015 United Nations Climate Change Conference: https://en.wikipedia.org/wiki/2015_United_Nations_Climate_Change_Conference

COP21: Paris climate change deal is end of fossil fuels - CNN.com: http://www.cnn.com/2015/12/12/opinions/sutter-cop21-climate-reaction/ 

India To Overtake China As Largest Populated Nation: https://www.google.com/search?q=2030+population+india&ie=utf-8&oe=utf-8

India will add more cars than China in 20 years: http://www.thehindubusinessline.com/economy/india-will-add-more-cars-than-china-in-20-years/article2939216.ece

Two billion vehicles projected to be on roads by 2035: http://www.csmonitor.com/Business/In-Gear/2014/0729/Two-billion-vehicles-projected-to-be-on-roads-by-2035

Air travel demand projected to double in 20 years: http://www.usatoday.com/story/travel/flights/2015/06/08/demand-to-fly-will-likely-double-but-industry-may-not-be-ready/28680637/

Will the True Wage Report Please Stand Up

The Labor Department, in releasing the weekly unemployment claims number, also released wage data for March.  As Reuters news is reporting:

Private sector wages and salaries were up 2.8 percent in the 12 months through March, the biggest gain since the third quarter of 2008, after rising 2.2 percent in the 12 months through December.

The only problem with this 2.8% increase is that it isn't consistent with the Employment Situation Report for March from another government agency: the Bureau of Labor and Statistics.  That report, in Table B (page 5), says that average weekly private-sector wages only rose 2.1% from $839.73 in March 2014 to $857.67 in March 2015; just barely above the core annual inflation rate of 1.8%.  

Does the Obama Administration think people are too dumb to compare two separate reports for their accuracy and consistency?  Is this a politically motivated report to counter GOP Presidential candidates and their increasing focus on the poor wage growth under Obama? 

References:

U.S. jobless claims at 15-year low; consumer spending rises: http://www.reuters.com/article/2015/04/30/us-usa-economy-idUSKBN0NL1JT20150430

THE  EMPLOYMENT  SITUATION  — M ARCH  2015: http://www.bls.gov/news.release/pdf/empsit.pdf

In rounding out the Labor Department’s report, core inflation advanced 1.8% on a year-over-year basis after gaining 1.7% in the 12 months ending February and 1.6% through January:  http://www.usinflationcalculator.com/inflation/us-inflation-in-march-rises-0-2-annual-rate-declines/10001692/

Restoring the American Dream: Economy & Jobs | GOP: https://www.gop.com/platform/restoring-the-american-dream/

Really? The Fastest Growth In GDP Since 2003?

In the latest iteration of Gross Domestic Product (GDP), we were told that the economy grew at 5% in the third quarter of this year.  This coupled with a 4.6% growth in the second quarter apparently gives us the fastest economic growth since 2003.

But, let me ask you this.  Do you feel like, financially, you are living in the best of times in the last 11 years?  Probably, not. 

So, why does the GDP growth look so good?  The answer is simple. Nearly a half trillion dollars in extra growth is being added to the GDP numbers each quarter that wasn't being counted in 2003.  That's because, beginning with the 2nd quarter of last year, the folks who calculate the GDP each quarter, the Bureau of Economic Analysis, started adding in the value of intellectual property -- the costs of research and development of new products, and the costs of buying copyrighted material such a movie scripts, books, songs, etc.  Previously, those costs were merely counted as intermediate business expenses that were ultimately rolled up into the final cost of the product and not counted as part of the GDP.

To understand that this is a significant change, let me use the example of a fictional publishing company who spends $100,000 to buy the rights to print an author's book.  In the past, that $100,000 was just written off as a business expense and the real value of it was enumerated in the GDP when the book was sold.  Today, under the new and creative accounting for intellectual property, that $100,000 cost is added to the GDP up front.  Then, subsequently, the book's sales are also added to the GDP when they occur.  This sure seems like some kind of double counting. Doesn't it?

Many believe this trickery adds a full one percent to the GDP growth each quarter.  So, last quarter's growth was probably only 4% -- not 5% -- when the old method of accounting was used.  Similarly, the 4.6% growth in the second quarter would have been 3.6%.  However, this new method of calculating the GDP certainly gives President Obama bragging rights regarding the growth of the economy being the fastest since 2003.

Lastly, in my opinion,  the best measure of the health of the economy is what you and I are spending.  And, last quarter, Americans only spent at an increased rate of 2.5%; well behind a supposed overall growth of  5%.  What's worse is that the  consumer is taking on record amounts of credit debt while increasing their spending.  Not a good thing.  What really drove the growth in GDP was a 9.9% growth in government spending and 8.9% increase in business investment (which includes intellectual property).

References:

The U.S. economy grew at its quickest pace in 11 years in the third quarter, the strongest sign yet that growth has decisively shifted into higher gear: http://www.cnbc.com/id/102291457

GDP: Does Lady Gaga Count?: http://www.econlife.com/gdp-does-lady-gaga-count/

GDP Revisions Make Recovery Look Better, Recession Not as Bad: http://blogs.wsj.com/economics/2013/07/31/gdp-revisions-make-recovery-look-better-recession-not-as-bad/

U.S. consumer credit up a record amount in July: http://blogs.marketwatch.com/capitolreport/2014/09/08/u-s-consumer-credit-up-a-record-amount-in-july/

With GDP growing strongly, Republicans' economic dilemma gets more complicated: http://www.washingtonpost.com/blogs/plum-line/wp/2014/12/23/with-gdp-growing-strongly-republicans-economic-dilemma-gets-more-complicated/

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Four Stories: Four Worrisome Signs That Our Economy Is In Trouble

When it comes to measuring the state of the economy, we know that 70-to-71% is driven by what you and I spend.  Therefore, in order for it to remain healthy and growing, the consumer must be increasingly active.  That activity, first and foremost, must come from increases in their incomes.  That brings us to the first story.

Just recently, the Bureau of Labor Statistics reported that real worker incomes -- incomes adjusted for inflation -- actually fell in June of 2014 when compared to June 2013.  While the drop is small -- 40 cents per work week or about $21 per worker per year -- the impact is fairly large when rolled up against 155 million workers; equaling a loss of a total of $3.2 billion in consumer buying power.  In other words, $3.2 billion that won't be spent to drive the economy.  More importantly, the economy could suffer even more by the "psychological" impact of lower wages.  That loss of $21 per year is an average.  So, some workers had a much larger loss of buying power.  If even a small percentage of employees feel they are behind the eight ball on salary and, as result, cut back a lot of discretionary spending, it could seriously hurt the economy.

Proof of the lack of consumer spending comes from another story.  Our major retailers are expected to close hundreds of stores in the U.S. as their retail sales continue to fall.  CNBC even called it a "Tsunami" of store closures. This is a sure sign that the shopper is backing away from spending.  Also, these closures mean a loss of jobs and, eventually, higher unemployment.

Then, there is this concern.  Last month's employment report showed an overall increase of 404,000 workers.  Of this, 275,000 temporary help jobs were created.  Simply, that means that almost 70% of the jobs created in June were low paying and temporary.  Whether this fact was because employers are making adjustments to cope with low business activity or because of their attempts to circumvent the 2015 mandates of ObamaCare, it is possibly another reason why wages have fallen. Again, there is a negative psychological impact when a worker can only find part time work.  It results in a lack of confidence and, more likely, another reason not to spend money on non-essentials.

Lastly, a recent report from the Urban Institute showed that 35% of American's face debt collection.  A fact that proves that they have been living beyond their incomes for quite some time. To put it simply, 35% of Americans could have their credit ratings adversely impacted.  As a result, it could affect their chances of getting or holding a job when wage garnishment is threatened. It could also mean that millions may not be able to buy a house or rent an apartment; or, purchase an automobile; or, get any further credit cards or loans for emergency situations.  Having a third of the population in financial trouble, is a formula for disaster which could greatly impact economic growth.

Of course, just yesterday, the economy was said to have grown by 4% in the second quarter.  However, this is a preliminary number; subject to 3 more revisions.  The question then becomes whether or not that 4% will hold or fall in the same way that the first quarter had positive growth in its preliminary number; only to go negative and stay negative after that initial number's release. As far as consumer spending was concerned, non-big ticket items matched the growth of the first quarter at 2.5%.  But, understand that much of that growth was due to extremely high prices for food; driven by the drought and bad weather. Energy prices also drove up spending, but consumer spending for services fell by half from the first quarter.  What really drove that supposed 4% growth in the second quarter was the fact that imports fell (normally, a higher import number is a negative drag on our economy).  But, a drop in imports may be a sign that consumers aren't buying much of the goods we normally get from China, Indonesia, Mexico, etc. and, that business upped their inventory of products in anticipation of future sales.  Whether or not those replenished inventories will sell in the future with what appears to be a cooling of buying activity seems to be unlikely. In essence, the consumer didn't really contribute to the growth of the economy in the second quarter.

References:

Real Incomes: June 2014: http://www.bls.gov/news.release/realer.t01.htm

A 'tsunami' of store closings expected to hit retail: http://www.cnbc.com/id/101353168

June 2014: Employment Situation Report: Table A: http://www.bls.gov/news.release/empsit.a.htm 

Study: 35 percent in US facing debt collectors: http://hosted.ap.org/dynamic/stories/U/US_DEBT_STUDY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-07-29-00-12-33

U.S. Second-Quarter GDP Expands at 4.0% Rate: http://online.wsj.com/articles/second-quarter-gdp-expands-at-4-0-rate-1406723867?mod=asia_home

Q2 GDP Surges 4%, Beats Estimates Driven By Inventories, Fixed Investment Spike; Historical Data Revised: http://www.zerohedge.com/news/2014-07-30/q2-gdp-surges-4-beats-estimates-driven-inventories-fixed-investment-spike-historical