The Great Recession

[IndependentlyPoor]

Quote:

Originally Posted by . . . Yrs to Go Productivity growth is the ONLY way an economy increases wages and standards of living over time. It is increased productivity and associated profits that encourages businesses to higher more workers.

This is the conventional wisdom that we were all raised on (and I do not disagree with it). We were taught that the American companies could afford to pay their workers the highest wages in the world because our workforce was the most productive in the word. (Cue swelling strains of Stars and Stripes forever).

But this chart of American productivity and wages seems to indicate that the game changed in the 1970s.
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The comforting way that rising wages tracked rising productivity ended. Anybody care to advance a theory as to why?

Embarrassing admission: I got this chart from some website recently, but didn't record the source and now I can't figure out where it came from.

[brewer12345]

Presumably globalization changed the balance of power/market dynamics and allowed employers to retain much of the value generated by productivity growth for themselves.

[Gone4Good]

Quote:

Originally Posted by IndependentlyPoor But this chart of American productivity and wages seems to indicate that the game changed in the 1970s.

Add corporate paid health insurance and benefits to the definition of "wages" and I think you'll see a different picture.

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Additionally, the original comment expressed an opinion that somehow high productivity was bad for both the economy and the stock market. As I recall, both have done very well since the mid-1970's.

[Gone4Good]

Quote:

Originally Posted by Running_Man . . .That trend has ended, I view the odds that a new productivity trend to provide a robust economy as very low, but I certainly will be very happy to experience a new burst in economic prosperity. . . .

Wow, I guess I didn't realize that nothing happened in the economy over the past 40 years other than falling mortgage rates. Apparently computers, the internet, wireless communications, robotics, cancer treatments, etc, etc, didn't have any sustainable impact on our overall standard of living. It was all just one giant housing related boom that is now over.

[Running_Man]

Quote:

Originally Posted by . . . Yrs to Go Wow, I guess I didn't realize that nothing happened in the economy over the past 40 years other than falling mortgage rates. Apparently computers, the internet, wireless communications, robotics, cancer treatments, etc, etc, didn't have any sustainable impact on our overall standard of living. It was all just one giant housing related boom that is now over.

Your statement was that NOTHING other than productivity could increase income over the long term. I was pointing out for example a
a fall in interest rates on a average mortgage of $90,000 in 1981 of 15 percent refinanced at 9 percent in 1985 would have given the average Wage earner would lessen the interest income by $5,400 a year or about a 25 percent increase, which also tended to increase his home by an additional 25 percent over the inflation rate as many average homes tended to sell for the amount of the affordable payment. So the average homeowner in 1985 from the drop in interest rates was the beneficiary of $22,000 of available equity and 25 percent higher income without anything else occuring in the economy. And that additional income made the purchases of non essential goods such as computers, cell phones and the internet much more affordable.

Do not sell the power of this trend short, but the reality is I hope I am wrong and you are right.

[IndependentlyPoor]

Looking better all the time.

[IndependentlyPoor]

Unemployment claims drop

Calculated Risk: Weekly Unemployment Claims Decline

[IndependentlyPoor]

Apologies for bumping this ancient thread, but I liked this chart and didn't know where else to put it (no anatomically difficult suggestions please).

from
The Daily Dish | By Andrew Sullivan

[FUEGO]

Quote:

Originally Posted by IndependentlyPoor Apologies for bumping this ancient thread, but I liked this chart and didn't know where else to put it (no anatomically difficult suggestions please). from The Daily Dish | By Andrew Sullivan

I imagine similar but slightly lower results would be obtained at most intervals in recent history, recession or no. If you asked someone "In the last three years of your financial life have you [insert questions from chart]".

Some segment of the population will always have financial problems or be trying to cut back.

[dex]

Quote:

Originally Posted by IndependentlyPoor But this chart of American productivity and wages seems to indicate that the game changed in the 1970s. The comforting way that rising wages tracked rising productivity ended. Anybody care to advance a theory as to why?

High paying mfg jobs in heavy and other industries went overseas, computerization and increase in lower paying service jobs.

[dex]

I'm hoping this and similar Depression type threads are a sign of a bottom in the stock market.

[IndependentlyPoor]

Quote:

Originally Posted by dex I'm hoping this and similar Depression type threads are a sign of a bottom in the stock market.

Me too.

[haha]

Quote:

Originally Posted by dex I'm hoping this and similar Depression type threads are a sign of a bottom in the stock market.

Don't hold your breath. May think that when there is pessimism around, the bottom must be near. Often his is far from true. Not everybody is stupid, so some will always be pointing in the right direction.

Japan is 21 years and counting into their slump. For much of this time, especially over the last 10 years, the consensus opinion has been very negative. Their market is still bumping along at about 25% of its 1989 peak.

Ha

[Leonidas]

I like the chart. My first thought was to wonder what a chart for the Great Depression would look like. What percentage went without food today? etc.

[REWahoo]

Interesting that 49% reported loaning money to someone while only 24% reported borrowing from friends/family. Are we to surmise half the folks who loaned money did so to strangers? Or maybe twice as many folks borrowed money but won't admit it?

[ziggy29]

Quote:

Originally Posted by REWahoo Interesting that 49% reported loaning money to someone while only 24% reported borrowing from friends/family. Are we to surmise half the folks who loaned money did so to strangers? Or maybe twice as many folks borrowed money but won't admit it?

Or maybe the people who borrowed did so repeatedly? If I borrow from two different people, that's two lenders and one borrower...

[kyounge1956]

Quote:

Originally Posted by REWahoo Interesting that 49% reported loaning money to someone while only 24% reported borrowing from friends/family. Are we to surmise half the folks who loaned money did so to strangers? Or maybe twice as many folks borrowed money but won't admit it?

Maybe 24% borrowed from two friends/relatives apiece.

[Zathras]

Or they loaned money to someone not in the age range of the survey.

[IndependentlyPoor]

Another chart. Long term unemployment was/is really bad this time.

[ziggy29]

Quote:

Originally Posted by IndependentlyPoor Another chart. Long term unemployment was/is really bad this time.

And let's not forget how much the official numbers understate actual unemployment and underemployment. 9.5%? I'll bet the real number is north of 15% if you include *everyone* currently hoping for full-time work and can't find it.