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Wages versus gold: A look at historical data

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One of the most visible measures of the condition of working families is the price level of a day’s wages. So, we figured it might make sense to subject those wages to the same sort of analysis we used in the last post: the withering criticism of an ounce of gold.

Here is a chart of an average day’s wage since 1964, as presented by the Bureau of Labor Statistics:

 Average wages in dollars

Chart 1: Average day's wage in dollars (1964-2010) (Source: bls.gov)

As is befitting a labor force enjoying the prosperity of the freest, most productive, nation on the planet, we have seen our wages rising for the entire period from 1964 to 2010. Even through depressions as intense as that of the Great Stagflation (the first set of green and red bars) and the current Great Recession (the second set of green and red bars) the average day’s wage of American workers has never fallen year over year.

Unfortunately, things are not so rosy when the value of a day’s wage is measured by an ounce of gold:

Chart 2: Average day's wage in gold (1964-2010) (Source: bls.gov)

Must Read Posts for July 19, 2010

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On The Economic Populist you might have noticed the right column. We try to list other sites and blogs who have exceptional insight and writing on what is happening in the U.S. economy.

Sometimes though, one cannot say it better but miss those who did.

Must Read Post #1

The Big Picture $4 trillion dollar hangover is also Bloomberg's chart of the day. Below is the ratio of mortgage debt to residential asset values.

 

 

Must Read Post #2

Paul Krugman asks is there a jobs mystery? He points us to the below chart, which I hope to look at deeper. For now it appears output has become spiked, starting in 2000 (can you say bad trade deals, China PNTR and offshore outsourcing?) in comparison with recessions of the past. The below graph is non-farm, Krugman has business, but the pattern remains. Notice the reduced output aligning with the grayed recession period and notice the output spikes are increasing, starting in 2001 to the unbelievable spike today. Also notice this recession cycle end date is not official. The grayed areas are the current probable end date.

 

 

Why the economy isn't recovering

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There has been a lot of talk about a double-dip recession recently by people like Paul Krugman and Nouriel Roubini, how to define it, and what it means. What is missing from these discussions is the most obvious question of all: why won't the economy recover?
Capitalism is supposed to be self-correcting - or so we've been told - and a recession like the one we've had is supposed to be that reset button. So why aren't businesses hiring?
I'm going to try to answer that question in the simplest way possible.

There are two primary reasons why the economy isn't recovering, one reason is cyclical, the other is secular.

Not ready for prime time: Some ideas on the relationship between gold and depressions

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Barry Eichengreen and Kevin H. O’Rourke have been updating us on the progress of this depression by comparing it to the big one, The Great Depression. Their original post, in April 6, 2009, captivated their audience.

One thing that struck me was that we might compare the two events to the totally overlooked depression of the 1970s – The Great Stagflation. The reason why this one is missing and, perhaps, lost from official economic history is that it did not look anything like how we expect a depression to look – at least by the accepted, albeit vague, standard of what constitutes a depression. For instance, as shown in the graph below, year over year Gross Domestic Product enjoyed an unbroken expansion during the entire period.

 

USGDPYOY - 1970-1980.jpg

Chart 1 (Source: Bureau of Economic Analysis)

Compare this performance to the contraction of GDP during the Great Depression

 

 USGDPYOY%20-%201929-1933.jpg

Chart 2 (Source: Bureau of Economic Analysis)

 

Must Read Posts for July 14, 2010

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On The Economic Populist you might have noticed the right column. We try to list other sites and blogs who have exceptional insight and writing on what is happening in the U.S. economy.

Sometimes though, one cannot say it better but miss those who did.

Must Read Post #1

The Big Picture overviews a Time magazine article that was not online, which shows lobbyists bought our government in 2009 for $3.49 billion dollars. Gee, that's about as cheap as Manhattan was in 1626 (60 guilders).

Must Read Post #2

A post close to the heart for we sure have been saying similar things. Naked Capitalism's guest piece, The G20 Plan for Prosperity – Rubber Bullets and Shredded Social Safety Net.

Must Read Post #3

The Atlantic Monthly investigates a new breed of debt collectors. Seems they are buying debt that either isn't legal or people don't even know about and doing some additional illegal things trying to squeeze some money out of these people.

Must Read Post #4

The Administration Double Speak on Jobs & Exports

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The most absurd thing is happening. Claiming to push exports, President Obama is planning on pushing a host of policies that are well documented to offshore outsource jobs and displace U.S. workers. On Obama's export council is Verizon, a notorious labor arbitrager. Ford, Disney, Pfizer (another notorious offshore outsourcer of advanced R&D), and Dow Chemical are also appointed.

Business Week:

He’ll have to push new trade agreements, higher quotas for skilled foreign workers, and tougher enforcement of intellectual-property rights.

On what planet, besides a made up one, does someone believe displacing a U.S. worker with a foreign guest worker helps U.S. workers get jobs? Of course firing Americans and replacing them with cheaper labor does not create U.S. jobs for American workers. Evidence of U.S. workforce displacement through global labor arbitrage is overwhelming. The top users of foreign guest worker visas are offshore outsourcers and even the GAO has documented the displacement and wage repression of U.S. workers.

Must Read Posts for July 11, 2010

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On The Economic Populist you might have noticed the right column. We try to list other sites and blogs who have exceptional insight and writing on what is happening in the U.S. economy.

Sometimes though, one cannot say it better but miss those who did.

Must Read Post #1

Calculated Risk has a series of sovereign debt and default. In three parts:

Must Read Post #2

The rich are walking away from their mortgages much more than the middle class and poor. I guess a sense of duty, ethics and personal responsibility in today's world just doesn't pay.

Must Read Post #3

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