The average US worker anticipates that in a year from now he or she will be earning the same or less in wages than right now, a 25-year low in income expectations, based on an analysis by Goldman Sachs.
The research explicitly compared expectations of real income growth, meaning that inflation was a significant consideration in the gloomy outlook. However, a combination of additional factors can also be blamed including the still-limping economy, anemic job growth, stagnant wages, lower-paying jobs, and fewer hours.
According to USA Today:
“Real hourly wages have dropped 2.1% on an annualized basis over the past six months, a rate of decline not seen in 20 years, according to Goldman. This analysis is backed up by the other most-watched consumer survey from the Conference Board, which indicated earlier this week that the proportion of consumers expecting their incomes to increase was below 15% in May.
“‘I am much more concerned that the second half resurgence we all expect never arrives and by early 2012 we are in a recession,’ said Joe Terranova, chief market strategist for Virtus Investment Partners and a ‘Fast Money’ trader. Stocks are sliding in June ahead of the monthly jobs report released on Friday. Economists have slashed the number of jobs they believe were added last month as a string of recent economic data have pointed to a slowdown. The 10-year Treasury yield broke below 3% Wednesday as investors bought bonds as a safehaven in case of the slowing economy.
“The fact that income expectations are so low, makes the jobs outlook that much more important, argues Goldman and other investors. These same surveys show that consumers are not nearly as pessimistic about job growth. So once enthusiasm on the labor front is dented at all, then all aspects of consumer confidence are lost.”
Dismal income expectations could potentially lower forecasts for consumer spending as well, meaning that business income, and subsequently the wages those businesses pay out, are that much less likely to pick up any time soon. You can read more details in the USA Today article on how Americans are belt tightening due to lower income expectations.
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