GDP Up, Wages Stagnant

Saturday, April 29, 2006 | 07:34 AM

As expected, GDP was up nearly 5% in Q1 2006 -- the 4.8% rise comes on top of the "tepid" 1.7% gain in Q4.

Once again, many people wrongly reach concIusions from a single data point: With the aftermath of Katrina and Rita disruptions, the loss of shipping down the Mississippi, and the shutting down of refineries and off-shore platforms, the hurricanes and loss of New Orleans was the specific cause of the 2005 Q4 number.

Similarly, the pushing forward of production and consumption from Q4 into Q1 explains the big pop in Q1. If you want to know what GDP is actually, use some common sense and average the 2 quarters:  GDP is growing about 3.25%. Same for durable goods: It spiked at a 20.6% pace in Q1 versus plummetting at a 16.6% rate in Q4 '05. 

Gdp_wages You should not need a Ph.D in Applied Mathematics to figure out what happened.

In a apparent surprise to economists -- but no surprise to readers of this blog -- wages were flat. As previously noted, there is inflation in everything but wages.

The WSJ noted:

"Despite the robust economic growth, a separate Labor Department report showed that compensation costs for employers rose only 0.6% in the first quarter -- the slowest quarterly gain in nearly seven years -- following a 0.8% gain in the fourth quarter.

Wages and salary growth was unchanged at 0.7% in the first quarter, and only 2.7% higher than a year ago. That came as a surprise to many economists as prevailing conditions suggest workers are in a better position to bargain for higher pay."

It was a surprise only to those model driven economists who do not have a way to validate their abstractions in the real world. Indeed, unless your skillset is very specific and highly quantifiable, your wage were flat. In Real terms, i.e., adjusted for CPI inflation -- they were slightly negative.

For the reality-based dwellers of the real world, put aside the CPI measured inflation fiction and consider actual cost of living increases: your purchasing power was down between 5 - 10%.

Ouch.

>

Source:
Economy Leaps, but Wages Stagnate
GDP Increases by 4.8% In Biggest Rise Since 2003; Growth in Salaries Is Flat
CHRISTOPHER CONKEY
WSJ, April 29, 2006; Page A3
http://online.wsj.com/article/SB114622713718138689.html

Saturday, April 29, 2006 | 07:34 AM | Permalink | Comments (22) | TrackBack (1)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c52a953ef00d8345d434669e2

Listed below are links to weblogs that reference GDP Up, Wages Stagnant:

» Mike's Blog Round Up from Crooks and Liars
[Read More]

Tracked on May 1, 2006 11:57:28 AM

Comments

More reason to pause and look at some FUTURE data.

Posted by: B | Apr 29, 2006 8:23:46 AM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner