If only we had higher wages we would have a better economy and the world would be better off

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If only we had higher wages we would have a better economy and the world would be better off

“Davidson” submits:

For 8yrs part of the conversation has centered around a weak recovery and weak Hourly Wage Growth.

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To paraphrase: “If only we had higher wages we would have a better economy and the world would be better off.”

The same talk flooded the media today with the higher than expected employment levels. The problem with this hand-wringing and the pressure for government action is that is and has been ‘wrong-headed’. Wage growth has been higher than inflation for most of the historic record since 1978 even though there have been periods when inflation did run hotter than wages. Wage growth is higher than inflation today and there has been real improvement in wages since the past 27yrs since Chairman Volcker stopped the 1970s inflationary spiral in the early 1980s. Real Wage Growth shows up in Real Personal Income and in Real Retail & Food Service Sales which are at record highs. If we did not have Real Wage Growth our standard of living and our economy would have declined!

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Wages, Inflation & Retail Sales

Summary:

Most of the concerns expressed since 2009 on the disappointment of nearly every economic measure have been colored by a negative bias. The data show a decent economic recovery has been in place for almost all participants. Why people have been so glum and misread the data for so long can only be attributed to human nature.

It is what it is. Economic activity has been quite positive since 2009. As long as investors are surprised by better economic data than expected, markets will move higher. History indicates this could be as much as 50%-100% than today. Only time will tell how high. Fortunately we do have economic tools to tell us when the markets are likely to see a major correction.

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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