Well, it’s not a rocketing, blatantly obvious recovery you can feel – but the current economic performance is certainly worthy of (finally) being classed a recovery.
Inflation, Unemployment, GDP… and Wage Growth?
We’ve been rambling on about inflation data for the last few months because we’ve seen the signs of inflation start to pick up in earnest – and by earnest, we mean north of 2.0%. We’ll continue to follow that indicator with great interest because, as you know, we’ve got a recurring series where we check market inflation expectations using Treasury prices.
We also told you we’d be checking in to discuss GDP and Unemployment – and even though the unemployment report disappointed a bit (fewer new jobs than expected, and a slight uptick to a 6.2% unemployment rate), we’re still happy about the current trend:
GDP was, of course, the wild card. This report was a special one – using new data, the BEA went back to correct past GDP numbers – including the numbers for the first quarter of 2014.
If you recall, that number was -2.9% annualized – a painful drop which was blamed on “inclement weather”. That number now stands at -2.1% – poor, sure, but we’ll take it. The big surprise came to the upside in the second quarter numbers: 4.0% annualized, real GDP growth in the second quarter.
If 2% is the new gotta-hit-target for annual GDP, there is now a reasonable chance we can hit it for the year – take the rough 1% annualized and real growth of the first half, mix it with a couple quarters of 3.0%+ annualized growth in the second half, and you’ve got yourself a reasonably strong and growing economy.
And then… wage growth?
Bring on the Wage Growth
At some point in the recovery, usually while you’re watching the inflation numbers increase, you start to notice that some of that growth is pressured by wage growth.
For all the optimistic (if not strong) numbers we’ve been tracking in the last few weeks, wage pressures are one thing we aren’t really seeing – most wage growth is being wiped out completely by the moderate inflation. Take real wage growth over the last year from the most recent BLS report: “Real average hourly earnings declined 0.1 percent, seasonally adjusted, from June 2013 to June 2014. ” And for the last month? “Real average hourly earnings for all employees was unchanged from May to June, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today.”
So – the rest of the pieces of the recovery are falling into place: moderate inflation, a growing economy, falling unemployment – but we’ll be waiting for wage growth to pick up.
So – what are you seeing out there? The signs of a mild recovery? Are you seeing income increases? Let us know in the comments!