Categorized | OP/ED

Where are the wages?

Posted on 03 October 2011

While the Federal Reserve and Administration have been focusing on creating jobs and cutting the high unemployment rate, it’s the stagnation in wages that is most likely resulting in poor growth coming out of the recession. Until the job market strengthens, workers have little room to negotiate higher earnings, and in the meantime, lower incomes and lower confidence means consumers may retrench.

 

Incomes fell in August for the third time in five months, with personal income dropping for the first time in two years, according to a Commerce Department report last week. Meanwhile, household income fell to $49,445 last year, according to the Census Bureau, its lowest in over a decade, while the poverty rate climbed to 15.1%, a 17-year high.

 

In terms of wages and employment, the economic recovery is seemingly non-existent. Salary and benefit growth “has been going nowhere,” said Mark Zandi, chief economist at Moody’s Analytics. “One of the key reasons the recovery has stalled is that real incomes have fallen.” Inflation-adjusted weekly earnings have declined for six consecutive months, falling 1.8% in August from the year earlier.

 

Consumer confidence has been slipping, with a record 91% of consumers saying they expect growth in their incomes will match or fall behind price gains in the coming year, according to the September Thomson Reuters/University of Michigan sentiment survey, which dates back to 1978. People will be spending on necessities, not desires, until the labor market improves.

 

Consumer spending rose at a 0.7% annual rate during the second quarter, less than half the 2.1% rate for the first quarter of 2011. Meanwhile, GDP grew less than 1% during the first two quarters. The economy isn’t growing fast enough to boost job growth to increase incomes.

 

All this comes at a time when corporations need to retain their existing employees. Incentive programs can and will provide employee motivation during these turbulent times.

 

Doyle J. Girouard is a business transformation consultant and coach, frequent speaker, and author. With 15 years of knowledge and experience in the Travel Industry he assists clients achieve strategic competitive advantage.

 

Doyle J. Girouard

CEO and Senior Managing Partner

The Cypress Group

Email; doyle@thecypressgroup.com

Website; www.thecypressgroup.com

Travel Website; www.TravelKeyNote.com

Twitter: http://twitter.com/doylejgirouard

Facebook; www.facebook.com/thecypressgroup

Phone; 817-421-4774

Cell; 817-307-7577

 

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