Is It Any Wonder?

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Is It Any Wonder?

Here are four reports that help explain where things are really at nowadays:

"Pimco’s El-Erian Says U.S. Economic Conditions Are Terrifying" (Bloomberg)

Pacific Investment Management Co.’s Chief Executive Officer Mohamed A. El-Erian said U.S. economic conditions are “terrifying” given that the nation’s is coming out of recession.

The odds of the U.S. returning to recession are one-third to half, El-Erian said in a Bloomberg Television interview with Betty Liu.

"Economic Inequality Is Growing, a Fed Blog Says" (Los Angeles Times)

Everyone from Occupy Wall Streeters to politicians seems to be talking about economic inequality these days, but actual data can be hard to find, especially regarding the effects of the 2007-09 recession. But a new set of numbers from Liberty Street Economics, the blog attached to the Federal Reserve Bank of New York, shows definitively that there is a growing gap between the upper and lower classes.

Economists Jaison R. Abel and Richard Deitz isolate 25 occupations and look at how median wages have changed over the last three decades. They find that rising wages in the highest-paying occupations, coupled with shrinking employment in middle-wage jobs, is leading to a startling income gap.

"With a rising share of jobs at the upper and lower ends of the wage distribution and a wider gap in wages among occupations, jobs have become more polarized in the United States over the last three decades," they write.

"Economic Insecurity" (Economix)

With the Census Bureau fine-tuning its definition of poverty, a group of “near poor” has emerged — those who are not officially poor but are perilously close to it.

Another way of putting that is to look at “economic security,” the amount of income necessary to cover basic expenses without relying on public subsidies.

A new report from Wider Opportunities for Women, a nonprofit group that previously produced an index of what it takes to do more than survive while working, shows that 45 percent of United States residents live without economic security. That means they are not earning enough income to cover basic expenses, plan for important life events like college or save for emergencies like unexpected health bills.

“What does it take for households in this country to get by and be able to plan for their own futures based on the work that they do?” said Donna Addkison, president and chief executive of Wider Opportunities for Women. “We’re really looking at not just the lowest of the lowest income households but that slice of households that live somewhere above the poverty line but are constantly in danger of being thrown into financial catastrophe, and that’s a much larger slice of the American public than we are currently talking about.”

"American Workers Worse Off During Recovery" (Stefan Karlsson's blog)

Between the last quarter of the U.S. recession, Q2 2009 and Q3 2011 nominal national income has increased 11.6%. Given the 4.7% increase in the domestic purchases price deflator that translates into a 6.6% gain, which is 2.9% at an annualized rate. A very weak recovery compared to those after the 1973-75 and particularly the 1981-82 recessions, but still clearly a recovery.

However, as the population has increased by 1.9%, per capita national income is up only 4.6%. And for the vast majority of Americans who rely primarily on income from their jobs, it gets worse. Because while real corporate profits rose as much as 49.6%, real labor income ("compensation of employees) rose only 0.9%. Given the 1.9% population increase, this means that real per capita labor income has fallen by 1% during the recovery.

It is normal for corporate profits to increase more than labor income during recoveries, just as it is normal for them to drop more than labor income during slumps. However, the divergence has been larger than normal this time, and more importantly economic growth has been much lower, creating the unusual situation where workers are worse off during a recovery. And since most Americans depend almost entirely on labor income, this means that most Americans are worse off during the recovery.

Still, it's not all bad -- right?

"FDIC: Bank Earnings hit highest level in 4 years" (Bloomberg)

Bank earnings rose over the summer to their highest level in more than four years, while the number of troubled banks fell for the second straight quarter, federal regulators reported Tuesday.

The Federal Deposit Insurance Corp. said the banking industry earned $35.3 billion in the July-September quarter. That's up from $23.8 billion in the same period last year. More than 60 percent of banks reported improved earnings.

The better earnings and fewer troubled banks suggest that the industry is steadily improving from the depths of the 2008 financial crisis.

Is it any wonder that people are beginning to rise up in protest?