By Tom Still
MADISONﾗThe business page of a major state newspaper recently carried two seemingly conflicting headlines: One announced strong national economic statistics; the other reported that state and U.S. workers are feeling less than optimistic about the economy.
Both stories are correct. By most indicators, the national economy is humming along. But if you ask Americans how confident they are, most will tell you that Santa Claus will be a bit thinner this year.
According to the latest Gallup poll, 63 percent of Americans rate the economy as only fair to poor, and by 58 to 36 percent people say the economy is getting worse instead of better.
It’s what some experts call “the joyless economy.” Core indicators about gross domestic product, the jobless rate and corporate productivity and profits are all pointed in the right direction, but workers and consumers are hedging their bets. The reason for pessimism may be relatively simple: The economic recovery has yet to affect their pocketbooks.
In August, the U.S. Census Bureau released family income data for 2004. It showed that while the economy had grown by 4.2 percent, the best performance since the boom year of 1999, most families actually lost economic ground. Real median household income — the income of households in the middle of the income curve, adjusted for inflation — fell for the fifth straight year.
The numbers for 2005 aren’t available yet, but they may not look much better. For many Americans, the rise in wages has not kept pace with inflation — particularly cost increases in energy and health care.
To be sure, wages and median family income often lag behind corporate profits and other indicators at the start of an economic recovery. But this recovery began in earnest in 2003, so the delay in wage growth is longer than what most economists would expect.
There may be reasons for the pessimism beyond sluggish wages. The war in Iraq and Afghanistan continues. People are waiting for the other shoe to fall with Katrina’s clean-up bills. Gasoline prices have dropped, but not by much — and the heating season is well under way. The number of Americans without health insurance is still rising. There is unease about the growing federal budget deficit. For Americans who are successful, their reward is higher federal taxes or, worse yet, the odious alternative minimum tax.
Also, there continues to be no small amount of nervousness about America’s position in the global economy. While Wisconsin escaped the latest round of plant closings and job cuts at General Motors, the state’s automotive manufacturing sector is nonetheless in transition.
The bankruptcy filing of Delphi, GM’s largest supplier, could affect 1,450 workers at the auto parts plant in Oak Creek. At Milwaukee’s Tower Automotive, production is expected to end soon, idling 300 workers. About 600 workers in the Racine area have lost jobs with the closing of another auto parts firm run by Intermet. The U.S. auto industry will bounce back, but not to previous job levels.
The national indicators are right — the economy is getting stronger because America is innovating its way into a brighter future. But the perceptions of workers and consumers are also right. For many of them, the economic recovery isn’t about national statistics, but their own bottom lines.