Stagnating wages weighing on Americans’ economic outlook

Stagnating wages are weighing on Americans’ optimism as the economy regains its footing after years of gradually expanding.

Economists say that even though the labor market is improving, along with other areas of the economy, the main source of consumer unease is the lack of real wage growth.

{mosads}”Most people have a job, and their perspective on the economy is determined by whether they got a raise, and if so, how big,” said Mark Zandi, chief economist with Moody’s Analytics.

“Unfortunately, wages have been growing at no more than the rate of inflation since the recession. In other words, living standards are going nowhere.”

Jared Bernstein, a senior fellow with the Center for Budget and Policy Priorities, said the cost of gas, food, housing, college education and childcare have outpaced paychecks of middle-class families, keeping them in a dour holding pattern. 

“There are a lot of people out there who haven’t gotten a pay raise,” he said. 

To counter that, many people decide that the only way to get ahead is to work more hours, and that creates stressors that disrupt the work-family balance.

Zandi said that sentiment will eventually pick up but it is not expected to happen before November’s midterm elections.

“The good news is that at current pace of job growth, the labor market will be strong enough a year from now that wage growth will begin to pick up, and two years from now, if everything hangs roughly together, wage growth should be strong,” he said.  

“It is at that point that people’s thinking about the economy will become much more upbeat.”

In 2012, median household income was $51,371, the first year since 2007 that wages didn’t drop.

Overall, median household income decreased 8.7 percent between 2007 and 2012, according to the Census Bureau.

While workers got a nearly 2 percent boost in their wages in the year ahead of the recession, the 12-year period starting in 2000 showed that median household incomes decreased 6.6 percent, Census said.  

More recently, the economy has added 200,000 jobs for six straight months and economic growth appreciated measurably in the second quarter, hitting a 4 percent annual rate in the April-June period.

Scott Anderson, an economist with Bank of the West, said while the economy has been expanding for several years, it hasn’t helped that brief periods of robust economic growth have been followed by long periods of mediocre performance.

“People are starting to see glimmers of hope and progress on the economy, but those hopes have been dashed in the past,” he said.

Chad Moutray, chief economist with the National Association of Manufacturers, said while there may be more reasons to be upbeat about economic conditions in the second half of the year, the contraction in the first quarter dampened those spirits.

“There is also a palpable frustration that the first half of the year grew frustratingly slow,” he said.

“Once again, real GDP will be around 2 percent this year, and while some indicators have reached their pre-recessionary levels, it took us 5 years — longer than normal — to achieve that milestone.”

In a new Wall Street Journal/NBC News poll showed on Wednesday, 52 percent of respondents said the economy has improved a bit but that it has a long way to go before things get better.

Meanwhile, 22 percent said the nation is still in unusually difficult economic times and things just have not improved that much, according to the survey of 1,000 adults. 

The poll also showed that a record-high 76 percent don’t feel confident that their children’s lives will better than theirs.

Possible culprits are that 27 percent of respondents said their child has at least $5,000 in student loan debt.

Another 25 percent say they have provided some financial support for a child over the age of 21, up from 19 percent in December 2009. 

Mostly, though, people blame Washington for the failure of the economy to make greater strides.

A majority — 71 percent — say the the sluggish economy up to this point is mostly due to the inability of Washington’s elected officials to take action.

Washington’s hand in the pessimistic outlook is clear with bouts of in-fighting that led to a debt-ceiling debate and government shutdown last fall that further clouded any chance for rising optimism.

“Political gridlock in Congress has meant more reliance on monetary policy to jump-start economic activity,” Anderson said.

“As a result, stocks, bonds, and home prices have soared, but wages and hiring have remained lackluster,” he said.

“This fuels feelings of inequality and fears about being left behind.”

In the survey, 44 percent said that the U.S. is a place where everyone, regardless of their background, can succeed.

But 54 percent agreed that growing income inequality between the wealthy and everyone else “is undermining the idea that every American has the opportunity to move up to a better standard of living.” 

Those hit hardest by the recession were much more likely to agree with that statement, the poll said.

That sentiment emerges in another way in the survey.

Nearly 80 percent said that increasing the fines and seeking jail time for leaders of financial institutions when they break the law and profit from their wrongdoing would help boost economic conditions.

Bernstein said that while prosecuting business leaders wouldn’t help the economy, it would bring about a sense of accountability and justice; many wealthier Americans have recovered from the recession while the middle class continues to struggle. 

A majority of those asked said that providing tax incentives for business to bring jobs back to the United States (85 percent) and making college more affordable (80 percent) would have a very positive or somewhat positive impact on improving the economy.

Spending on infrastructure (75 percent), cutting regulations that add to businesses costs (70 percent), keeping business taxes low (66 percent), increasing taxes on the wealthiest Americans (64 percent) and raising the minimum wage (60 percent) also would help.

Meanwhile, 60 percent don’t like how President Obama is handling foreign policy, while only 36 percent approve, his worst-ever showing.

In a separate question, 62 percent say they aren’t happy with America’s role in the world, as crises rage in Ukraine and the Middle East.

Anderson argued that those conflicts raise concerns that policy is “adrift with no one piloting the ship in Washington.”  

“Many Americans see bubbles and economic uncertainty at every turn.”