When we were in full employment and people needed workers and my employer told me he was only going to give me a cost of living increase I told them flat out I wouldn't except it. I wanted a real wage increase above the cost of living because my labor was in demand.
When you have GDP growing at a rate that jobs aren't created employers don't have to give cost of living raises because you can be replaced in about 5 seconds. When you have real inflation on food and energy and wages are under pressure because there is way more supply then demand inflation destroys buying power. Less buying power means less demand and the cycle continues...
A little inflation in a vibrant economy and wages generally keep up. Inflation in a dead economy is death to the middle class. The fed wanted to create inflation to create demand instead it has reduced buying power and demand is starting to follow, GDP growth is slowing.
And that is why a tax increase could really hurt. Demand is down and a tax increase could make it fall further
They were revised up from 1.8% to 1.9% for the first quarter down from 3.1% for the 4th quarter. The revision is because of inventory gains. They also revised up the inflation rate and most economist have revised down the yearly growth from 3.1 to 2.7%.
By any measure the economy is in stagflation. Growth to low to create jobs along with inflation that reduces buying power. Hopefully much of this was a parts issue from Japan and lost confidence because of Europe?
We need to get growth rated much higher to have a chance to reduce some of the chronic unemployment. By any measure this is a weak slow recovery at best and the start of a chronic period of sputtering growth coupled with inflation that slowly bleeds the working middle class?
Last edited by Winstonbiggs; 06-29-2011 at 11:33 AM.