Monday, October 20, 2003

You'd never know it, but technically we're not in a recession -- we're in a recovery, as measured by growth in gross domestic product, and we have been for nearly two years. As Morgan Stanley economist Stephen Roach points out it's a screw-the-workers recovery -- although he doesn't put it quite that way -- and this could have ongoing consequences:

Wage and salary disbursements -- by far the dominant component of personal income -- are basically unchanged in real terms fully 21 months into this recovery; by contrast, at this juncture in the past six upturns, real wage income has been up, on average, by about 9%. The gap between the current cycle and the norm of earlier cycles works out to a shortfall of about $320 billion in real terms, or 4.4% of the current level of real disposable personal income.... Absent other sources of support -- tax cuts, home mortgage refinancing, or a renewal of vigorous hiring -- this shortfall of internally driven income generation could end up spelling serious trouble for the overly indebted, saving-short American consumer....

The flip side of this saga is, of course, quite beneficial to Corporate America. Sourcing demand through low-cost, offshore labor input has become an increasingly important tactic to enhance the operating efficiency of US businesses.... While this has resulted in a significant improvement in corporate earnings, the American workforce is not sharing the benefits.

I'll say.

(Thanks to Nathan Newman for the link.)

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