How is the economy?

Well it depends on who you ask.

According to an AP piece in the Strib, there is hope because small caps are starting to do well.

…some analysts are actually finding some signs in the performance of small-company stocks that might be pointing to the early stages of a much broader recovery.

but there are dissenters,

Kim Caughey, equity research analyst for Fort Pitt Capital, said she thinks the rise of small-caps might be more of an anomaly and not some kind of sign of a rebound.

Now that is all great if you are worried about moving around your investments.  For little players like me, this means I can shift where my mutual funds are focused, but this is small beans for me, and for a majority of Americans.  A majority are struggling from paycheck to paycheck, not worrying about what different size cap(italization) funds are the place to put our investments.

And the pain isn’t isolated to those struggling from paycheck to paycheck.  Even boat owners in Minnesota are thinking twice about their recreational activity and the associated costs, notably the rising price in gas.  As the Strib reported,

There was nothing Kim and Rick Klocek enjoyed more than taking out their 34-foot-long, twin-engine boat, sweetly named Kimsport, for the 11-mile cruise around the bays of Lake Minnetonka.

So it was with a tear in Kim’s eye that they recently sold her namesake, downsizing to a more fuel-friendly 23-footer christened after her husband.

“It was the most choked up I ever got selling a boat,” Kim said. “It used to cost $20 for gas; now it’s just crazy.”

To which Rick shrugged: “I just couldn’t justify taking it out anymore for two hours and being out $70 on gas.”

Okay, I am not shedding too big a tear for them, after all they only downsized a bit, and still will get to boat around Lake Minnetonka, they probably are still doing alright in the other financial aspects of their lives.  Like this guy, he is shifting his priorities.

“Certain things are special about living in Minnesota, and this is a quality-of-life deal,” Duane Lund, a commercial real estate broker from Orono, said the other day after pumping $400 worth of gas into his 33-footer.

That put his fuel tanks a smidgen over half full.

“I’ll cut down on going out to eat and entertainment, but I’m not going to cut back on my boating hours,” he said.

Like I said, I am not crying for these folks that are making decisions with multiple options.  What about the people who can’t afford to own a 20 foot+ boat?  Well the Economic Policy Institute has just issued a press release on these folks fate in the current economic conditions.

On a yearly basis, hourly wages of the bottom 80% of the workforce in blue-collar production or non-managerial service jobs grew 3.4%, the lowest yearly growth rate since January 2006. A year ago, this growth rate was 4.1%, solid evidence that the weak job market is placing downward pressure on workers’ wages.

Although workers’ weekly hours were unchanged last month, they are down over the past year. The combination of diminished weekly hours and slowing hourly wages resulted in a 2.8% growth in weekly paychecks over the past year, the lowest growth rate since September 2005. With annual inflation tracking upwards of 4%, this means falling real earnings and diminished buying power for workers’ paychecks.

These decelerating wage trends tilt sharply against any evidence that faster price growth is driving faster wage growth. Instead, the weak bargaining power of most workers means they are subject to pressures from three sides: declining jobs and hours, slower hourly wage growth, and faster price growth. This punishing combination is lowering their living standards and is surely behind the historically very low readings on consumer confidence.

It would be nice if the media focused more on the plight of the average American, not just on the hardships that the well off face in make choices in how they spend their disposable income, while a majority of Americans are making much harder choices about which necessities they can afford.

This reminds me of the media coverage of the Metro Transit bus strikes here in the Twin Cities in October 1995 and March 2004.  At the beginning all the coverage focused on the hardships for commuters that were no longer to opt into transit to get to their downtown jobs and the resulting traffic nightmare.  But it wasn’t until later in the strike that coverage included those folks whose only option was transit.  In 2004, they got to that issue faster, but it was still secondary to those who were inconvenienced.

-Josh

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