Worker pay “grew” at a 0.2% pace in Q2. The slowest increase since 1982. This confirms what came out yesterday in the Q2 GDP report that the middle class is getting squeezed out of existence.
So the headline is: US GDP rose to 2.3%, which was less than the consensus of 2.6% and 10 bps light of the Atlanta’s Fed 2.4%.
But what can we make of the number?
The first reading of quarterly GDP by the Bureau of Economic Analysis has plenty of educated guesses included in the number. That’s why it is revised twice and still subject to revision 5 years out.
The BEA did revise the last two 1st quarter number to reflect what is called “Second Seasonal Adjustment” since the BEA believes that they were guessing wrong on Q1 numbers the last two years.
If it’s too low, change the metric is a better way of describing this. So Q1 2015 came in as a positive with the reading going from -0.2% to 0.6%.
Q1 2014 remained negative, but not as bad as before.
Overall a little cited stat from the BEA is that the US economy over the last 5 years has grown an anemic 2.2% pace.
With trillions injected into the upper echelon of the economy — never to trickle down to wage growth or savings interest — 2.2% is laughable.
If the US consumer is roughly 70% of the GDP number through their spending, well this economic model is deeply flawed.
But what is more important, have the largest banks — both here and abroad — balance sheets look better or allow the US middle class to thrive?
The monetary policy of the US over the last 5 years dictates that the banks are far more important.
“We’ll let the little guys get some crumbs in their 401(k)s with a stock bubble to make them feel better,” is probably a quote said somewhere in the White House by one of Obama’s economic advisers.