According to the Census Bureau, median household income has decreased for the last 4 years (2000-2004), from $45,065 in 2000 to $44,398 in 2004 (in 2004 dollars). The mean (average) income has dropped as well, from $62,114 to $60,528. Over the same time, the poverty rate has increased from 11.7% to 12.7%. The three year rolling average of the number of families in poverty has increase from 32,907,000 to 36,997,000.
Let's see, incomes are down the poverty rate is up. That's some great economic policy in action.
In the last 4 years, we have seen two large areas of US business slowly slide into economic oblivion - airlines and auto companies. GM recently announced they would lay-off 30,000 employees and undertake a corporate restructuring. Ford just announced they would lay off 7500 workers and close 8 plants. The airlines are facing similar problems. 5 airlines are currently in bankruptcy. The industry faces losses this year of 10 billion dollars. These two industries employee over 1 million people. When big US business is in trouble, people get concerned.
Weak Job Growth
The Bureau of Labor Services breaks the job market down into 15 sub-areas. Since January of 2001, only 5 of these areas has shown an increase in the number of jobs - education and health employees (+2,000,000), government (+1,000,000), construction (+550,000), leisure and hospitality (+700,000), professional services (+200,000). All other areas of employment have experienced a net decrease in the number of jobs available. In other words, this expansion is narrowly tailored to a few areas of the economy, as opposed to everybody benefiting.
Let's say you use to work in a factory, but your previous employer closed. Now you are looking for work at another factory. Well, you are not alone because the US has lost 2.8 million manufacturing jobs in the last 4 years. How about programmers? That industry has lost almost 600,000 jobs in the last 4 years. Hell, you can always work in the "leisure and hospitality" industry for half the pay. But, at least you have a job.
Weak Wage Growth
Inflation adjusted wages are near stagnant for the last 5 years. After inflation, non-supervisory wages have increased a scant .5% since January 2001. This represents the salary of between 70%-80% of the workforce. In other words, most people aren't making any more money than they were 5 years ago.
So, what's holding it all together?
Cheap money. Drop interest rates to a negative rate after inflation which encourages people to borrow. That's the whole secret of this economy. Greenspan dropped rates in the 2000-2001 period to literally nothing. He only started raising rates in the last 12 months from a ridiculously low level. By historical standards, money is still cheap. The Fed appears to be targeting a neutral policy stance - one where rates neither stimulate nor restrain growth. Only time will tell if they are effective.
Median and Average incomes are down; poverty is up. Most wages are stagnant after inflation. Headline grabbing news of big US business being bankrupt or downsizing is prominent. Job Growth is limited to a few select economic areas. No wonder people are concerned about the economy - they have every reason to be.