Tag Archives: economy

SSA Gets Punk’d; Average Wages Worse Than Originally Thought

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The Social Security Administration got punk'd by two people who filed wildly inflated W-2s, maybe as some kind of joke.  The result of the SSA finding is that they had to revise their latest wage numbers:

Removing the phony W-2s reduced total compensation by $32.3 billion or 0.55 percent of all the wages, salaries and bonuses earned by Americans. The total number of people with any work was reduced by two to 150,917,733.

As a result of the revisions, the data show that the average wage in 2009 dollars declined by $457 (not $243), a 1.2 percent decline from 2008. The revision shows that since 2000 the average wage, in 2009 dollars, barely changed in real terms, increasing only $347 or 0.9 percent after nine years.

The median wage – half make more, half less — was unchanged at $26,261. The median is $37 lower than in 2000 and $253 lower than in 2008.

So our country's median wage has declined over the last 10 years?! Add that little tidbit of info to the fact that a good chunk of us are living in houses, our single biggest asset, that are worth significantly less than they were two years ago and I think you begin to see why so many folks are ticked off right now.  

Happy Days

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You know how the economists are all like, "The recession is over! The recession is over!" and we regular schmoes are all like, "Maybe, but the world's still a big ****hole"?  Well, the Census Bureau is here to validate our feelings:

The new figures show, among other things, that the number of people getting married fell to a record low level in 2009, with just 52 percent of adults 18 and over saying they were joined in wedlock, compared to 57 percent in 2000…

The government revealed that the income gap between the richest and poorest Americans grew last year by the largest margin ever, stark evidence of the impact the long recession starting in 2007 has had in upending lives and putting the young at greater risk.

The top-earning 20 percent of Americans — those making more than $100,000 each year — received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by the bottom 20 percent of wage-earners who fell below the poverty line, according to the newly released Census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

A different measure, the international Gini index, found U.S. income inequality at its highest level since the Census Bureau began tracking household income in 1967. The U.S. also has the greatest disparity among Western industrialized nations.

At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, government data show. Families at the $50,000 median level slipped lower.

Three states — New York, Connecticut and Texas — and the District of Columbia had the largest gaps in rich and poor, disparities that exceeded the national average. Similar income gaps were evident in large cities such as New York, Miami, Los Angeles, Boston and Atlanta, home to both highly paid financial and high-tech jobs as well as clusters of poorer immigrant and minority residents.

On the other end of the scale, Alaska, Utah, Wyoming, Idaho and Hawaii had the smallest income gaps.

What Percentage of Personal Income Comes From Private Pay?

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If you had to guess what percentage of Americans' personal income would you say comes from wages paid by private employers?  75%?  60%?  50%?  The answer, my friends, is 41.9%.  That's a record low, and to me it's an amazing number.  From the USA Today article:

Key shifts in income this year:

• Private wages. A record-low 41.9% of the nation's personal income came from private wages and salaries in the first quarter, down from 44.6% when the recession began in December 2007.

•Government benefits. Individuals got 17.9% of their income from government programs in the first quarter, up from 14.2% when the recession started. Programs for the elderly, the poor and the unemployed all grew in cost and importance. An additional 9.8% of personal income was paid as wages to government employees.

Okay, I have a question that I'm hoping someone smarter than me and with more time to do research can answer: If about 42% of personal income comes from pay and about 28% comes from government programs/wages, then where does the other 30% come from?  I can think of medical benefits and interest on investments, but my little pea brain can't come up with anything else.

h/t to Fec for the link.

Economy Explained With a Fable

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FT.com columnist Martin Wolf explains the current international economic environment with a play on Aesop's fable The Ant and the Grasshopper:

Everybody in the west knows the fable of the grasshopper and the ant. The grasshopper is lazy and sings away the summer, while the ant piles up stores for the winter. When the cold weather comes, the grasshopper begs the ant for food. The ant refuses and the grasshopper starves. The moral of this story? Idleness brings want…

As it happens, in the wider world, there are other ant nests. Asia, in particular, is full of them. There is a rich nest, rather like Germany, called Japan. There is also a huge, but poorer, nest called China. These also want to become rich by selling goods to grasshoppers at low prices and building up claims on grasshopper colonies. The Chinese nest even fixes the foreign price of its currency at a level that guarantees the extreme cheapness of its goods. Fortunately, for the Asians, or so it seems, there happens to be a very big and exceptionally industrious grasshopper colony, called America. Indeed, the only way you would know it is a grasshopper colony is that its motto is: “In shopping we trust”. Asian nests develop a relationship with America similar to Germany’s with its neighbours. Asian ants build up piles of grasshopper debt and feel rich…

Yet there is a difference. When the crash comes to America and households stop borrowing and spending and the fiscal deficit explodes, the government does not say to itself: “This is dangerous; we must cut back spending.” Instead, it says: “We must spend even more, to keep the economy humming.” So the fiscal deficit becomes enormous.

This makes the Asians nervous. So the leader of China’s nest tells America: “We, your creditors, insist you stop borrowing, just as European grasshoppers are now doing.” The leader of the American colony laughs: “We did not ask you to lend us this money. In fact, we told you it was a folly. We are going to make sure American grasshoppers have jobs. If you do not want to lend us money, raise the price of your currency. Then we will make what we used to buy and you will no longer have to lend to us.” So America teaches creditors a lesson from a dead sage: “If you owe your bank $100, you have a problem; but if you owe $100m, it does.” 

Tomorrow’s Economic Forecast Decidedly Mixed

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You know how weather forecasters always hedge their bets with phrases like, "Tomorrow's forecast is decidedly mixed" which, to me, is like saying "You may or may not wake up tomorrow."  Anyway, all the recent economic news has me thinking that our economic forecast is, well, decidedly mixed.  In bullet point fashion:

Yep.  All in all I'd say our economic outlook is decidedly mixed, and I'll even go out on a limb and say that the markets will close either up or down tomorrow.  Tomorrow I'll tell you why the winner of the 2011 Super Bowl will most likely be a team that plays in the NFL.

Things Are Getting Better, but…

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The Dixon Hughes Triad Business Index for March, 2010 shows that the local economy is improving, but it's not by much and we've got a heckuva long way to go before we can say things are good.  It will be interesting to see what happens in real estate when the stimulus plan expires at the end of this week, but when you read this from the report you wonder how much worse it can get (knock on wood):

At the end of the 1st quarter of 2010, the inventory of homes on the market was 9,098, or 6.3 times the number of homes sold in the 1st quarter.  At the current sales pace, it will take 18.9 months to exhaust the existing inventory.  The number of existing homes offered for sale was up 16.5% from what it was at the end of the 4th quarter, and it was 9.5% higher than at the end of the 1st quarter one year ago. 

The price of the average home sold in the 1st quarter was down 2.8% from the previous quarter.  The average quality-adjusted price of an existing home in the Triad was $158,718.  The average this quarter was down 1.7% from the average recorded in the 1st quarter of last year.  By comparison, over the past year, consumer prices nationally have risen 2.2%.

Don’t Just Blame the Banksters or the Bums

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It's easy, convenient, a good story line, etc. to blame the Great Recession on a-hole investment bankers trying make a quick buck, or stupid home buyers who should have known better than to buy a $500,000 house on $45,000 a year in income, but it's also wrong.  As with most things in life it's complicated, and hopefully we'll start seeing more in-depth explanations for the financial meltdown as we move out of crisis mode and into recovery/finger-pointing mode.

I might have found a good place to start in today's Wall Street Journal.  Columnist David Wessel profiles the University of Chicago's Raghuram Rajan who has an upcoming book (July publication date) titled "Fault Lines: How Hidden Fractures Still Threaten the World Economy."  Based on the quotes that Wessel provides from his interview of Rajan it sounds like the book will look at the crisis from a big-picture angle, and while the usual suspects are identified as key players in the crisis they are also seen as role players and not arch villains.  I think that's an important distinction if we're going to learn anything from this crisis and fix whatever we need to fix if we're not going to completely torch the economy.

Anyway, here's my favorite quote from the column:

 "When easy money pushed by a deep pocketed government comes into contact with the profit motive of a sophisticated, amoral financial sector, a deep fault line develops," Mr. Rajan writes.

Don’t Worry, Be Happy

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For some reason I've been in a great mood today despite coming across a litany of not-so-positive economic news.  To wit:

  • Commercial real estate pros say no recovery until 2011 
    "The fourth quarter 2009 LoopNet Pulse Poll said the number of respondents that think commercial real estate transactions will rebound in 2011 jumped to 46 percent, compared to 13 percent in its third quarter survey.

    And 50 percent said they anticipate a rebound in 2010, which is down from 66 percent in the survey taken in the third quarter."

  • Foundation giving likely to fall 10% 
    "When the year wraps up, foundation giving likely will be down by more than 10 percent. The Foundation Center predicted a fall of 8 percent to 13 percent earlier this year.

    The Foundation Center, a New York City organization supported by nearly 550 foundations, also predicts that foundation giving will decrease even more in 2010."

  • Bankers slow hiring, cut costs
    According to a survey of chief financial officers and senior comptrollers conducted by Grant Thornton LLP, only 20 percent said their company will increase hiring in the next six months while 55 percent said executive bonuses will be trimmed.

    Only 40 percent believe the U.S. economy will improve by the first quarter of 2010, compared to 49 percent of financial officers across all industry sectors. The majority of bankers, about 53 percent, expect the economy to come out of the recession in the second half of 2010.

What the hell, we're all gonna die eventually anyway.  As the song says, "don't worry, be happy!"

AP Economic Stress Index

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Fec linked to the AP Economic Stress Index and he apparently heard about it from a commenter.  The index is very interesting, and according to it Guilford County (12.56) is slightly more stressed than Forsyth (11.02).  FYI, 100 indicates maximum stress.  In October 2007 the Guilford number was 5.52 and Forsyth's was 5.64, but I don't think anyone would be shocked to learn that we're more than twice as stressed as we were two years ago. 

Of course it's all relative.  12.56 is a walk in the park compared to these places:

  • Nye County, Nevada – 23.73
  • Yuma County, Arizone – 25.82
  • Imperial County, California – 33.52