After seven years, US households are finally seeing a material pay raise. The Census Bureau reported recently that the median US household’s income rose 5.2% (inflation adjusted) to $56,516 (see chart below).* In fact this is the largest increase on a year over year basis going back decades. This is welcome news to an economy that is still struggling after the financial collapse and great recession in 2007-2008.
Recall one of our core themes since 2008 has been expect a slow growth recovery, one with lots of bumps and bruises along the way. History shows that financial crises are different than your garden variety recession. The recovery after a financial crises takes much longer and economic growth remains well below trend. Around the globe, many countries are still struggling with after effects of the imbalances that built up prior to 2008. Economic growth in Europe and Japan is stuck in the basement. Unemployment outside the US remains high and we have seen a hollowing out of the middle class. When you look at the average worker’s paycheck, it is still below 2007 levels.
One of our other themes has been expect a period of social gloom to hang over us. When one feels worse off than he did 10 years ago, this should not be a surprise. The natural reaction to this is to circle the wagons and move inwards – an increase in populism while moving away from globalism. The social mood, the rise in atypical political candidates not only here in the US but overseas – this is all related and a fall out from what transpired 10 years ago. Given the overall social mood, you wouldn’t think US stocks could be near record high prices but markets have a tendency to surprise.
The good news is that we continue to heal in the US. Home prices are recovering. The US consumer is spending and has repaired his balance sheet. Unemployment continues to moderate. There are near record numbers of job openings. Now we are seeing gains in wages. We are not out of the woods and I would like to see overseas economies play catch up to the US. However, it will continue to get better. I am a big believer in the old fashioned ingenuity of the human race. It just will take time. Every generation faces significant obstacles but we keep moving forward.
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As Chief Investment Officer for Planning Solutions Group, Jon provides innovative investment planning strategies to our clients. He has over 15 years of experience in the financial services industry. Prior to joining Planning Solutions Group, Jon worked in the institutional market place. He provided investment advice to a client base consisting of large asset management and mutual fund companies, state retirement funds and hedge funds. His experience in the institutional market included Vice President of Institutional Sales for Deutsche Bank in Baltimore and Chicago. Prior to this, Jon worked as a research analyst for Croft-Leominster, an investment advisory firm in Baltimore. His focus was analyzing and recommending securities for inclusion in client portfolios. Jon is a Chartered Financial Analyst (CFA) charterholder. He has been recognized as a Five Star Wealth Manager, featured in Baltimore Magazine. He is also NASD Series 7 and 63 registered. Jon graduated from the Johns Hopkins University where he majored in economics. He lives in Towson, MD with his wife & two sons. To email Jon:firstname.lastname@example.org