Wednesday, July 30, 2003

'Why is the drop in consumer confidence a big deal?' one might ask. After all, the General puts little stock of any kind in surveys about peoples' feelings, especially when it comes to the economy. The importance comes primarily in refracting these July figures through the prism of real earnings.

Since December 2002 real hourly earnings have stagnated. In 1982 dollars, average hourly earnings stood at:
  • $8.30 for December
  • $8.28 for January
  • $8.26 for February
  • $8.22 for March
  • $8.27 for April
  • $8.31 for May
  • $8.30 for June
Thus for the past six months US workers' earnings have been spinning their wheels. As the production side of the economy begins to exhibit a pulse, the consumption side is going nowhere and more importantly with little capacity to go anywhere, either. If American workers' wages aren't going up, only debt, tax cuts or transfer payments can buoy the Amazing American Consumption Machine. In light of current record levels of consumer debt, state and local government tax increases and budget cuts, and the ever-expanding federal US budget deficit, where exactly are these compensatory dollars coming to come from?

The Bush administration's mantra has always been "I will gladly pay you Tuesday for a hamburger today." Maybe Tuesday is coming closer than George is willing to admit.


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