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This is a very good point. It's worth comparing to history, but it's also worth keeping an eye on when the old paradigm breaks. The lasting booms starting post
by Bartweiss 8y ago
This is a very good point. It's worth comparing to history, but it's also worth keeping an eye on when the old paradigm breaks.
The lasting booms starting post WWII surprised economists of the time. Stagflation was so out-of-model that the 1970s caused a major shift in economic theory. The list goes on.
And, of course, we already know that traditionally aligned indicators have been out of sync since ~2007. Productivity and wages broke lockstep in the 70s, wage growth has lagged employment growth to an unprecedented degree since 2009, the current consumer debt bubble is overwhelmingly student loan debt which is largely non-dischargeable and impossible to repossess.
There's an entire genre of thinkpieces arguing that the economy has been doing something unprecedented since 2008, a lot of which line up with your third theory where a strong stock market is basically a reaction to weak fundamentals in other investment categories. It's weird to see that abandoned when people try to do predictions from past indicators.
- simonsarris 8y ago> Productivity and wages broke lockstep in the 70s Welllll kinda. Total inflation adjusted comp has done almost nothing but go up: https://fred.stlouisfed.org/series/COMPRNFB https://fred.stlouisfed.org/series/COMPRNFB But I think this too was a paradigm change: Wages shifted to untaxed benefits, like healthcare. At least I think that's going on.
- dv_dt 8y agoWhen you plot the line absent a comparison to growth to company productivity, it loses context. https://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/ https://www.epi.org/publication/understanding-the-historic-d... > There is a widespread but mistaken belief that wage stagnation has been partially caused by a shift of compensation toward benefits. Benefits have grown far less than most people realize, rising from 18.3 percent of compensation in 1979 to just 19.7 percent of compensation in 2014
- simonsarris 8y agoWow, great counterpoint. Thanks.
- Bartweiss 8y agoHey, thanks very much for this. I've been seeing "rising non-salary compensation" used to explain the gap for ages, but I've never seen anyone actually use the proper comparison. Not exactly convincing with the productivity chart retained.
- padobson 8y ago> Productivity and wages broke lockstep in the 70s, wage growth has lagged employment growth to an unprecedented degree since 2009 I certainly believe this on a national scale, but I've never seen these stats properly adjusted for globalization. A billion people were lifted out of poverty in the time period mentioned. It doesn't seem to me that these traditional indicators are wrong, they've just been corrected for a global marketplace.