JUDGING THE ECONOMY….Max Sawicky enters the fever swamp of mainstream economics and produces the following anecdote:
An econ professor I know likes to tell a story of his days as a Fed employee. At some kind of meeting new numbers were reported, to the effect that real wages had declined in a recent period. He recalls that a cheer went up among those present.
Business reporters do the same thing. Whether this is because they’re equally clueless or because they’re just following the crowd, I couldn’t say.
There’s a broad basket of economic indicators that we’d all like to see going in the right direction. We all want high GDP growth, low unemployment, a rising stock market, low inflation, etc. etc. But if you put a gun to my head and told me I could judge the health of an economy by only one statistic, my choice would be median income. If it’s going up in real terms, the odds are good that the economy is in fine fettle. If it’s stagnant or dropping, trouble is brewing. After all, what’s the point of all the other stuff if 80% of the country isn’t getting any benefit from it?