Although we are seeing the economy starting to have as Brad dealing puts it “some unambiguously good unemployment news as new claims dropped below 350,000 for the first time in over two years, the economy is still weak for the average American. MB at Wampum notes that the average hourly wage for the American worker has fundamentally ceased to increase. Since November of 2002 hourly wages for non-exempt workers have been stuck in a 4 cent band in 1982 dollars. There is no new purchasing power being distributed to workers.
The Economic Policy Institute has a good graph that illustrates this point and they correctly note that wage growth, in the long run should roughly correlate to productivity growth and economic growth in general. However we have seen two good years of productivity growth and no corresponding wage growth. This is definitely a long and variable lag.
What new jobs are being created are not as good as that jobs that are being lost. Another EPI quickshot demonstrates that the growing industries in this economy have lower wages than the declining industries which are losing jobs. This is a probable explanation as to why median income has been falling for two years now.
The average Joe Six-Pack is not seeing an economic recovery. Instead he is seeing an increase in his debt service obligations, no increase in his real wages, increased housing costs and a decrease in his overall standard of living. Savings are depleted and the risk factor of being unemployed is extremely high still. One or two good reports such as the ISM survey do not remove this uncertainty and risk from the average Joe’s mind.