Post-WWII, Americans got used to a rising standard of living. There have only been a dozen years since 1950 that did not see at least 5% growth in personal disposal income. Eight of those 12 years have come since 2001.
Last year’s 3.3% rise in real DPI was the smallest increase since 2009’s Great Recession. The relatively pitiful 2012 number was inflated. Late in the year companies rushed to accelerate payment of 2013 dividends and year-end bonuses ahead of what threatened to be, much higher federal income tax rates. Many firms also declared large special payouts.
Without front-loading of that extra slug of income late in 2012, things would have registered much worse.
Exclude 2009 as an outlier and last year’s number, even with huge non-recurring items, was the lowest year-over-year change during most of our lifetimes. Working stiffs who didn’t own dividend paying stocks or qualify for bonus payments felt much worse than even the low 3.3% final figure suggested.
Predictably, 2013 income has been worse. Money brought forward to December 2012 cannot be paid again in the subsequent year. The trailing 12-month increase in DPI through May 2013 was 1.45% nominally (unadjusted for inflation) setting up the current year as a major setback. Real DPI barely budged at a 0.43% increase over those 12 months.
Those who measure their cost of living by counting the outlay for a basket of identical goods and services versus one year earlier know that our government’s CPI numbers far understate true inflation.
Typical citizens have been getting squeezed in multiple ways. Higher income taxes, increasing property taxes and ever-rising sales tax rates leave less disposable income than ever before. More expensive price tags on almost everything you need (utilities, gasoline, food, health care, etc.) make for reduced purchasing power on whatever is left.
The true standard of living has been going down for most people. Many have resorted to tapping savings or borrowed from their 401K retirement accounts just to make ends meet.
No wonder people are having trouble seeing America’s "economic recovery."
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