According to a study by Economic Policy Institute, a nonpartisan think tank, between 2009 and 2014, the salaries of CEOs at the largest U.S. companies increased by 54.3%. (Source: Economic Policy Institute, June 22,2015.)
But the average American hasn’t done that well.
Between 2009 and 2013, median U.S. household income declined by four percent—from $54,059 to $51,939 in 2013. (Source: Federal Reserve Bank of St. Louis, last accessed June 25, 2015.) While the data for 2014 is not available yet, even if there were some improvement, I’m sure it would not be significant.
As I have been writing in Profit Confidential, for solid economic growth to develop in the U.S., the middle class needs to be behind it. In all the past economic recoveries I have studied, average Americans increased their spending for goods and services and, as a result, the U.S. economy prospered. After all, consumer spending makes up two-thirds of U.S. gross domestic product (GDP). But in this so-called economic recovery, the increase in consumer spending is missing from the equation.
To get economic growth moving, income disparity is the last thing you want. You want to see wages rise across the board, so both the middle and lower classes spend in addition to the rich.
Rise in Food Stamp Usage More Proof of Average American Suffering
Income disparity is just one place where it’s clear the U.S. economy isn’t headed in the right direction.
Look at the usage of food stamps. During periods of economic growth, you would expect fewer Americans getting government assistance to put food on the table. But on this recovery, things have only gotten worse. Between 2008 and 2014, food stamp usage in the U.S. economy increased by almost 65%! (Source: U.S. Department of Agriculture, last accessed June 25, 2015.)
Putting this in perspective; the number of Americans using food stamps in 2014 (46.53 million) was equal to the entire population of Spain!
Outlook for U.S. Economy for Rest of 2015
Dear reader, please don’t buy into the mainstream rhetoric that suggests everything is just fine with the U.S. economy. Look at the data yourself. The monetary policy implemented by the Federal Reserve since the Great Recession has created severe income and wealth disparity; something that is not what you want to achieve with real long-term growth.
And those few who have money can only consume/spend so much. I can’t stress this enough; the powerhouse that can really give a boost to the U.S. economic growth rates, the middle-class, is in a squeeze.
In the first quarter of 2015, the U.S. economy didn’t grow, it actually contracted. With U.S. stock markets having gone nowhere in the first half of 2015 (to me, stocks are putting in a huge top here), and with the rebound in stock prices from the 2009 lows likely over now, we could be in big trouble.
As the stock market bubble that the Fed created deflates (or, more likely, bursts), the economy will only get worse. Next thing you know, you have a couple more quarters of negative GDP, and then suddenly we’re back in a recession again. That’s what I see happening.