Krugman Nails It Again

Paul Krugman nails it again in today's New York Times. In Our So-Called Boom he analyzes where this sudden excess of profit is going, noting that,

"It was a merry Christmas for Sharper Image and Neiman Marcus, which reported big sales increases over last year's holiday season. It was considerably less cheery at Wal-Mart and other low-priced chains. We don't know the final sales figures yet, but it's clear that high-end stores did very well, while stores catering to middle- and low-income families achieved only modest gains.

"Based on these reports, you may be tempted to speculate that the economic recovery is an exclusive party, and most people weren't invited. You'd be right."

He finds that while the economy is adding jobs, it's only doing so at a rate of about 90,000 a month, well under the 150,000 that would be needed merely to keep up with the expanding workforce, and certainly much lower than the astonishing 225,000 jobs added per month during the Clinton years.

It's almost hard to believe those numbers now, like the 1990's were some kind of Fairy Land that America had inadvertently traipsed into. My generation is going to turn into that annoying grandparent or great-aunt that goes on and on about how good it was back in the day.

But of course, if things stay on present course, children may pine to hear stories of the good old days when young people could pull down $35,000 a year with nothing more than a basic knowledge of computers.

Krugman:

"But if the number of jobs isn't rising much, aren't workers at least earning more? You may have thought so. After all, companies have been able to increase output without hiring more workers, thanks to the rapidly rising output per worker. (Yes, that's a tautology.) Historically, higher productivity has translated into rising wages. But not this time: thanks to a weak labor market, employers have felt no pressure to share productivity gains. Calculations by the Economic Policy Institute show real wages for most workers flat or falling even as the economy expands."

So is Krugman just a naysayer? Are we getting on the right track while he insists impatiently that we aren't quite on the right track yet? Is it possible that when Bush talks about the need to focus on the deficit in a second term, he's not kidding?