A look at the correlation between real aggregate wage growth and consumer consumption. Here is a direct link.
Consumer spending drives 70% of the US economy. And wage growth has historically been highly correlated with consumption rates. Makes sense. Then in the credit bubble, wages stagnated, but consumption managed to surge as consumers took on perilous levels of debt (as shown in the clip’s charts). In the past 3 years wages have stagnated at the same time that consumer credit use has declined. In the real world, now post credit bubble, consumers are back to spending in accordance with their income. And therein lies the challenge to the growth bulls forecasting 2-3% economic growth. Not surprisingly, this RBC economist is still optimistic notwithstanding the facts before him. Risk products must be sold regardless of price or prospects after all.
;
