It Doesn’t Feel Like A Recovery

by Patrick Appel

Economy Impressions

Americans mostly hear bad news about the economy:

Frequently, assessments of the economy have a partisan dimension – and in this week’s poll that is true when it comes to overall judgments.  But that isn’t the case when it comes to what people are hearing.  For example, 58% of Republicans say the overall economy is getting worse, and only 6% say it is improving.  Democrats say the economy is improving, by 35% to 23%.  While that is a much smaller margin in the positive direction than the Republicans’ negative evaluation, it is still positive. But both Democrats and Republicans hear bad news more than good news – and from both the news media and from friends and relatives.

Last week, Josh Barro tackled why many Americans incorrectly believe we’re still in a recession:

Two trends are responsible. The labor market is still slack, meaning millions who would like to work can’t, and those who do work have limited ability to demand higher wages …

For four decades, even in stronger economic times, wage gains have not kept pace with economic growth. Wages and salaries peaked at more than 51 percent of the economy in the late 1960s; they fell to 45 percent by the start of the last recession in 2007 and have since fallen to 42 percent.

When the economy does grow, that growth disproportionately accrues to the owners of capital instead of to wage earners; and in the last few years, weak growth and abundant labor have made that pattern even stronger than normal.

Arnold Kling adds a caveat:

I would note that a very important part of that trend is the shift from “straight” wages and salaries to other forms of compensation, notably health insurance. Higher payroll taxes also play a role. The share of total compensation to GDP held up fairly well until recently.