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Comment by joefranklinsrs | Hacker News Reader

Could you link something that supports your opinion?

As for me: US consumer confidence surges in August to 18 year high. https://www.theguardian.com/business/2018/aug/29/us-economy-.... Consumers wouldn't be spending if they didn't have extra cash in their pocket, and they expect the economy to stagnate/decline

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Wage data is well-tracked and is shown to be growing more slowly than inflation. It's possible the high growth in nominal wages are engendering some good feelings, but actual purchasing power is dropping.

https://www.washingtonpost.com/amphtml/business/2018/07/12/i...

My theory is that people are moving up to better jobs, after years of job training, education, and depressed demands, after 2008. Which would explain the low unemployment rate. Thus even though the wages for some industries are stagnating/declining, people are moving to better job positions, and thus have more money to spend.

Do you have data? That sounds like speculation.

https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx

Probably has nothing to do with all the credit consumers and businesses are running up:

https://www.cnbc.com/2018/05/21/consumer-debt-is-set-to-reac...

https://www.washingtonpost.com/business/economy/beware-the-m...

No in fact it doesn't. American households are in tremendous shape compared to many of their peers. The household debt burden is at a 15 1/2 year low (household debt as a share of disposable income). [1]

Unlike the fake boom of 2004-2008, this one isn't built on a large expansion of household debt. Businesses have levered up some, however business profits are at an all-time high and debt accumulation began to decline in the most recent quarter (the tax changes + Fed rate policies should continue to push toward a decline; companies like Microsoft, Apple and others took on immense debt temporarily to use it to pay out profits to shareholders via debt rather than repatriate their cash at a high tax rate).

In fact, the single most interesting thing about this economic expansion, is that we haven't seen a big increase in household debt accumulation vs income, compared to the prior three major expansions (late 1980s, mid to late 1990s, and mid 2000s). That either implies consumers are skittish about unnecessarily taking on debt (trauma from the great recession, very plausible), or there's another very big leg left in this expansion (which would be fueled by debt).

"With personal disposable incomes at a $15.46 trillion annual rate in the quarter, the debt-to-income ratio dipped to 86%. That’s the lowest, by an admittedly small amount, since the fourth quarter of 2002. At the height of the credit bubble in 2008, debts topped at 116% of disposable income."

Household debt service payments as a share of disposable income is extremely low, near the lows of the last 40 years:

https://fred.stlouisfed.org/series/TDSP

[1] https://www.marketwatch.com/story/households-in-best-positio...

What you should be looking at is total compensation. Wages plus non-wage benefits. It’s been growing over the last few decades and out pacing inflation.

The down side is a lot of that is medical insurance where most people don’t see a benefit from the higher expenditure.

Given that so much of it is medical insurance, why is that what you should be looking at?

Because you're still getting paid it.

If it doesn’t make you better off, what’s the point?

If paying more for medical care isn't getting you better medical care, making you being better off, then the problem is elsewhere. Not stagnant income.

The ultimate point here is that economic gains aren’t improving things for the average person. The exact reason for that is secondary.

Going off what the other poster said, when you don't see a benefit from the system you don't really care about the reason why. When a large portion of society doesn't see a benefit from the system, they're not really gonna care that the economy is "better than ever" and ar going to start engaging in activity that the current economic/social system finds destructive, because they will be trying to replace that system

If medical costs go up, that factors in to inflation.

While it's true that wage growth has been slower during since 2009 than in previous business cycles, it's false that real wages have actually gone down (it's up about 1-4% since the end of the last recession depending on how you measure[1]). Additionally, benefits have grown quite a bit over the long term, which makes looking at just wages misleading. If you look at total compensation, we've seen a 60% increase since the beginning of the 70s and about 30% since the 90s[2].

Slightly off topic, but I also found it interesting that net transfers (e.g. from the government) also make up a much larger percentage of total household income than they used to (growing from 5% in 1950 to about 17% now[3].)

[1] https://fred.stlouisfed.org/graph/?g=l1e2

[2] https://fred.stlouisfed.org/graph/?g=74dI

[3] https://fred.stlouisfed.org/graph/?g=7rNW

Indeed the cost of benefits has risen precipitously while the value has dropped. White-collar professionals are insulated from this by a combination of much greater employer contribution ratios and a healthier risk pool.

I had read an article claiming that the major source of government transfers were due to a much larger percentage of people being on Social Security disability. The causes are a mix of improvement in the enrollment process and a loss of jobs in regions that experience lower migration. I could be misremembering aspects of this so I won't be shocked if someone disputes this.

Anecdotally, I feel as though the trend amongst my friends and family has been that the cost of benefits has increased, while the benefits themselves have contracted. I'm lucky to work at a fairly young company where we get nice health insurance options, but even so, our sick leave policy leaves something to be desired.

>> The economy is growing but it doesn't appear to actually be flowing back into most citizens pockets. The unemployment rate is very low but wages aren't rising.

> Could you link something that supports your opinion?

This does: Are Superstar Firms and Amazon Effects Reshaping the Economy? (https://www.nytimes.com/2018/08/25/upshot/big-corporations-i...)

> The biggest companies may be influencing things like inflation and wage growth, possibly at the expense of central bankers’ power to do so.

"Consumers wouldn't be spending if they didn't have extra cash in their pocket, and they expect the economy to stagnate/decline"

Debt, leverage, credit cards, loans, home equity lines, etc.

Perhaps 2007 is a great teacher about overleveraged consumers "spending money in their pockets".

It wasn't real, sustainable, and ended terribly.

> Consumers wouldn't be spending if they didn't have extra cash in their pocket, and they expect the economy to stagnate/decline

Cash... or credit. Americans currently hold around $3.6 trillion in credit cards and auto/student loans - those types of credit can hinder long-term growth.

And the CCI is not a predictive metric. Consumers don't consider the economy in their purchasing decisions unless the media has given them reason to be concerned... if they're even paying attention to news at all.

I'm also curious how CCI is influenced by lowering expectations - if populations have been struggling to find jobs for the past 4 years, how do people answer?

> Consumers wouldn't be spending if they didn't have extra cash in their pocket

The entire credit industry would beg to differ.

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