September Stagflation Index Sags
The Stagflation Index (SFI) for September fell to -15 as cost of living increases outpaced wage gains. This bit of bad news for workers comes during a week when the Dow Jones Industrial average broke 10,000 and the price of oil topped $75 per barrel.
The September data from the Bureau of Labor Statistics indicate that wages failed to keep pace with inflation for non-managerial workers in the private sector, those of us who make up about 80% of the American workforce. The key data:
Consumer Price Index (CPI) +0.2%
Average Hourly Earnings (AHE) +$0.01 or +0.05%
Average Hourly Wage $18.67/hour
Calculating the September increase in wages adjusted for inflation:
(AHE – CPI) = (0.05 – 0.2) = -0.15
September Stagflation Index = -0.15 X 100 = -15
I’m not optimistic about the current economic “recovery.” The last time unemployment was this high was the early 1980s. The recovery that followed that recession was supported by three major factors:
1. The Baby-Boomers” were in their peak earning years.
2. Cheap oil. The Alaskan oil pipeline was completed, North Sea oil wells came on line, and Pemex (Mexican national oil company) produced at a frenetic pace. Oil prices plummeted to around $10 per barrel. That is not happening now. As the economy improves ever so slightly, oil prices are going up.
3. Growth in defense industries, computer technologies, and financial services during the 10980s put a lot of people to work and earned a lot of money.
Now, the Baby-Boomers, faced with under-funded retirements, are hanging on to their jobs, making for a very tough job market for young workers. High unemployment will keep wages low. Low wages will keep consumer spending low.
Demand for oil will keep prices high. “Drill baby drill” will not lower prices like in 1982. Demand is higher now, supplies are lower. Oil companies don’t want lower prices, anyway.
The only potential technological saviour is green technology and infrastructure. As the oil companies and their surragates fight to maintain the status quo, nations less entrenched in old, dying technologies will develop, patent, and build the renewable energy systems they will eventually sell to a crumbling and no longer industrialized America.
I hope I’m wrong about all of that. I see what the makers of Harry and Louise did to health care reform in 1993, others, like George Will, who deny the climate change warnings from the scientists at the UN Intergovernmental Panel on Climate Change (IPCC), are doing to energy reform now.
Those of us for sustainability: economic vitality, environmental quality, and equal opportunity, we have to keep hammering. Keep hammering.
