February Comparative U.S. Wage Rates Increase 2.9%….

Reposting part of a previous outline by request.  The repost is requested as an outcome of the latest wage rate news within the February labor report.  The wage rate increase is not being highlighted, and in some reports downplayed, by media.   However, the measurable matrices inside the space between two economic engines is responding according to prior outline on the new economic dimension.

First the recap of the day’s news on labor rates:

WASHINGTON DC – With the labor market near full employment, wage growth could speed up as companies are forced to raise compensation to retain employees and attract skilled workers. A proxy for take-home pay rose a solid 0.5 percent in February.

The annual wage increase is close to the 3 percent to 3.5 percent range that economists say is needed to lift inflation to the Fed’s 2 percent target. Inflation is already firming, in part as commodity prices rise.

Rising inflation, together with a tighter labor market, stock market boom and strengthening global economy, has left some economists expecting that the Fed could increase rates much faster than currently anticipated by financial markets.

The U.S. central bank lifted its benchmark overnight rate in December and has forecast three rate increases for 2017. (link)

The critical aspect within all of the media financial reports, is an expectation that the Fed will increase interest rates as a consequence of the economic data being collected.  In essence the Fed doing what it traditionally does to control economic activity.

However, CTH has proposed a rather significant divergence from this thought being carried by these cause and effect principles within the Fed.   In essence, the short version is: don’t expect anything the fed does to immediately impact Main Street in the same time frames as previous.   The reason there will be a delay is simply because the financial economy is too far apart from the main street economy.

This is going to be slightly unnerving for financial markets and for those who are not changing their thinking.  Unnerving, because action by those engaged in monetary policy will take much longer to transfer over the divide created within the past three decades.  Especially the ever widening scope of the divide in the past 20 years.

Here’s the prior discussion on the predictable lag caused by this non-discussed divide.  Pay attention to the outline against the backdrop of the reports released today.

——  Previously —–

Traditional economic principles have revolved around the Macro and Micro with interventionist influences driven by GDP (Gross Domestic Product, or total economic output), interest rates, inflation rates and federally controlled monetary policy designed to steer the broad economic outcomes.

Additionally, in large measure, the various data points which underline Macro principles are two dimensional.  As the X-Axis goes thus, the Y-Axis responds accordingly… and so it goes…. and so it has historically gone.

trump convention 2

Traditional monetary policy has centered upon a belief of cause and effect: (ex.1) If inflation grows, it can be reduced by rising interest rates.  Or, (ex.2) as GDP shrinks, it too can be affected by decreases in interest rates to stimulate investment/production etc.

However, against the backdrop of economic Globalism -vs- economic Americanism, CTH is noting the two dimensional economic approach is no longer a relevant model.  There is another economic dimension, a third dimension. An undiscovered depth or distance between the “X” and the “Y”.

I believe it is critical to understand this new dimension in order to understand Trump economic principles, and the subsequent “America-First” economy he’s building.

As the distance between the X and Y increases over time, the affect detaches – slowly and almost invisibly.  I believe understanding this hidden distance perspective will reconcile many of the current economic contractions. I also predict this third dimension will soon be discovered and will be extremely consequential in the coming decade.

To understand the basic theory, allow me to introduce a visual image to assist comprehension.   Think about the two economies, Wall Street (paper or false economy) and Main Street (real or traditional economy) as two parallel roads or tracks.  Think of Wall Street as one train engine and Main Street as another.

The Metaphor – Several decades ago, 1980-ish, our two economic engines started out in South Florida with the Wall Street economy on I-95 the East Coast, and the Main Street economy on I-75 the West Coast.  The distance between them less than 100 miles.

As each economy heads North, over time the distance between them grows.  As they cross the Florida State line Wall Street’s engine (I-95) is now 200 miles from Main Street’s engine (traveling I-75).

As we have discussed – the legislative outcomes, along with the monetary policy therein, follows the economic engine carrying the greatest political influence.  Our historic result is monetary policy followed the Wall Street engine.

a17b2-hip-replacement-recall-bribery[…]  there had to be a point where the value of the second economy (Wall Street) surpassed the value of the first economy (Main Street).

Investments, and the bets therein, needed to expand outside of the USA. hence, globalist investing.

However, a second more consequential aspect happened simultaneously.  The politicians became more valuable to the Wall Street team than the Main Street team;  and Wall Street had deeper pockets because their economy was now larger.

As a consequence Wall Street started funding political candidates and asking for legislation that benefited their interests.

When Main Street was purchasing the legislative influence the outcomes were beneficial to Main Street, and by direct attachment those outcomes also benefited the average American inside the real economy.

When Wall Street began purchasing the legislative influence, the outcomes therein became beneficial to Wall Street. Those benefits are detached from improving the livelihoods of main street Americans because the benefits are “global” needs. Global financial interests, investment interests, are now the primary filter through which the DC legislative outcomes are considered.

There is a natural disconnect. (more)

Here is an example of the resulting impact as felt by consumers:

economy-1

♦ TWO ECONOMIES – Time continues to pass as each economy heads North.

Economic Globalism expands.  Wall Street’s false (paper) economy becomes the far greater economy.  Federal fiscal policy, specifically political policy, follows and fuels the larger economy.  In turn the Wall Street benefactors pay back the politicians.

Economic Nationalism shrinks.  Main Street’s real (traditional) economy shrinks.  Domestic manufacturing drops. Jobs are off-shored.  Main Street companies try to offset the shrinking economy with increased productivity (the fuel).  Wages stagnate.

Now it’s 1990 – The Wall Street economic engine (traveling I-95) reaches Northern North Carolina.  However, it’s now 500 miles away from Main Street’s engine (traveling I-75).  The Appalachian range rises up during the DotCom boom and is the geographic wedge further enhancing the divide (a metaphor for ‘trickle down’ fractured).

By the time the decade of 2000 arrives – Wall Street’s well fueled engine, and the accompanying DC legislative attention, influence and monetary policy, has reached Philadelphia.

However, Main Street’s engine is in Ohio (they’re now 700 miles apart) and almost out of fuel; there simply is no more productivity to squeeze.

From that moment in time, ’00, and from that geographic location, all forward travel (all economic policy under Clinton/Bush) is now only going to push the two economies further apart.  I-95 now heads North East, and I-75 heads due North through Michigan.  The distance between these engines is going to grow much more significantly with each passing mile/month….

However, and this is a key reference point, if you are judging their advancing progress from a globalist vessel (filled with traditional academic economists) in the mid-Atlantic, both economies (both engines) would seem to be essentially in the same place based on their latitude.

From a two-dimensional linear perspective you cannot tell the distance between them.

It is within this distance between the two economies, which grew over time, where a new economic dimension has been created and is not getting attention.  It is critical to understand the detachment.

Within this three dimensional detachment you understand why Near-Zero interest rates no longer drive an expansion of the GDP.  The Main Street economic engine is just too far away from policy to gain any substantive benefit.

Despite their domestic origin in NY/DC, traditional fiscal policies (over time) have focused exclusively on the Wall Street, Globalist economy.   The Wall Street Economic engine was simply seen as the only economy that would survive.  The Main Street engine was viewed by DC, and those who assemble the legislative priorities therein, as a dying engine, lacking fuel, and destined to be service driven only….

Within the new 3rd economic dimension, the distance between Wall Street and Main Street economic engines, you will find the data to reconcile years of odd economic detachment; AND simultaneously find a trail of evidence for future predictions.

Here’s where it gets really interesting.  Understanding the distance between the real Main Street economic engine and the false Wall Street economic engine will help all of us to understand the scope of an upcoming economic lag; which, rather remarkably I would add, is a very interesting dynamic.

Think carefully about these two engines doing a turn about and beginning a rapid reverse. Federal economic policy, via Trump, now focuses on assistance to the previously down-played economic engine that drives the middle class.

GDP can, and in my opinion, will, expand quickly.  However, any interest rate hikes (fiscal policy) intended to cool down that expansion -fearful of inflation- will take a long time to traverse the divide.

Additionally, inflation on durable goods will be insignificant – even as international trade agreements are renegotiated.  Why?  Simply because the originating nations of those products are going to go through the same type of economic detachment described above.

Those global manufacturing economies will first respond to any increases in export costs (tariffs etc.), by driving their own productivity higher as an initial offset, in the same manner American workers went through in the past two decades.  The manufacturing enterprise and the financial sector remain focused on the pricing.

♦ Inflation on imported durable goods sold in America, while necessary, will ultimately be minimal during this initial period; and expand more significantly as time progresses and off-shored manufacturing finds less and less ways to be productive.   Over time, durable good prices will increase – but it will come much later.

♦ Inflation on domestic consumable goods ‘may‘ indeed rise at a faster pace. However, it can be expected that U.S. wage rates will respond faster, naturally faster, than any fiscal policy because inflation on fast-turn consumable goods become re-coupled to the ability of wage rates to afford them.

The fiscal policy impact lag, caused by the distance between federal fiscal action and the domestic Main Street economy, will now work in our favor.  That is, in favor of the middle-class.

Within the aforementioned distance between “X” and “Y”, a result of three decades traveled by two divergent economic engines, is our new economic dimension….

Trump thumbs up

We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment,” said the platform released by the Republican National Committee. (link)

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This entry was posted in Big Government, Big Stupid Government, Donald Trump, Economy, energy, Environmentalism, EPA, Legislation, media bias, Predictions, President Trump, Trade Deal, Uncategorized, US Treasury. Bookmark the permalink.

44 Responses to February Comparative U.S. Wage Rates Increase 2.9%….

  1. Joe says:

    SD must sleep well, when he does sleep, talk about squeezing every drop out of your day. It was exhausting just to read.

    Liked by 7 people

  2. I’m calling the EMTs right now. My heart can’t stand all this winning. Cardiac arrest is imminent. TOO MUCH WINNING!

    Liked by 5 people

  3. Chuck says:

    I wonder if this huge influx of jobs PTrump is working on will offset what looks to be a complicated transition to the main street economy?

    Liked by 1 person

    • Jedi9 says:

      Markets hardly moved though on the NFP (Non Farm Employment Change) although average Hourly earnings decreased slightly. Maybe the looming rate hike next week at the next FOMC meeting will do it. USD/JPY and the AUD/USD, and EUR/USD didn’t budge but holding steady. Biggest indicator is USD/JPY, as most are eyeing 120 from current levels at 114.95.

      Liked by 1 person

    • The Boss says:

      FWIW, these are undoubtedly great economic numbers all around for Trump’s first full calendar month. Happens to be that February is the shortest month by about 10%. As normal 30- and 31-day months follow, just think what a few more days of winning each month might look like!

      Liked by 4 people

  4. Sanj says:

    Sundance, who the heck are you? I know you wont answer but the insight into such avaried range of topics amazes me.
    Well done!

    Liked by 6 people

  5. Pam says:

    This is what happens when you put a businessman in the white house. Yes, it is too much winning.

    Liked by 7 people

  6. A2 says:

    I agree that the wage rate increase is significant. The Rip Van Winkle economy is waking up and best of all the pay packet is jingling.

    Liked by 4 people

  7. sundance says:

    Regional economics are going to be YUGE.

    Places where stuff is made are going to be greater than.
    Places where stuff is sold, (coastal affluence) are going to be less than.

    Have kids going to college? Send them to regions where stuff used to be made. They’ll have more fun there because the economies are going to be triggered.

    Liked by 14 people

    • wheatietoo says:

      Rebuilding our Military should also have a positive effect on our economy and private sector job numbers…don’t you think?

      Granted, it is a govt expenditure, but it will be spent on US Manufactured goods & services.

      Liked by 3 people

      • Finalage says:

        Not too mention if Trump gets our allies to increase their defense spending and buy our military equipment to help balance trade out. It will lead to a major manufacturing renaissance in the US assisted by increased global defense procurement.

        Liked by 4 people

    • thesavvyinvester says:

      The Trump Victory was a shift in the center of gravity and the rotational axis of power from NY, DC, Hollyweird and Beacon Hill ( more on that one later ) to the working stiff in OH, PA, MI and WI. PDJT gave it back if you will to the blue collars who had been getting the shaft for 30 years, PDJT is serving the blue collars. and those out of power cannot stand it, Romney =’s Obama =’s Beacon Hill. Their was no difference in what was accomplished by Obama that Romney already hadn’t and he was a hand maiden to Beacon Hill. IMHO we were metaphorically run by the Beacon Hill mantra for 8 years. Understand that and you will get why these area’s out of power are in a lather and are marching and sometimes with funny things on their heads, they don’t get us rubes from flyover country and never will….

      Like

  8. Finalage says:

    With high durable economic growth, high interest rates will actually be a good thing. Look no further than the 1980s and you will see that when there is real economic growth, higher real interest rates leads to more investment and a higher stock market. If this economy was being fueled by an asset related boom, then higher interest rates would be a big problem. The Trump economy is being fueled by the rebuilding of America (military, infrastructure, manufacturing base, etc). Couple all of this with the deregulation agenda of the president and you will have big, big growth gains in the coming months and years.

    Ultimately, higher US growth will give the US much greater leverage in trade negotiations and that will lead to more jobs and investment coming back to the US. If Trump can achieve his health care reform, deregulation agenda, tax cut and infrastructure program this year, we will witness economic growth that we haven’t seen since the roaring 1920s in this country. We may even see budget surpluses again.

    By 2020, the Dems may do what they did in response to the SOTU and field a political unknown to be the sacrificial lamb to run against President Trump! MAGA!!

    Liked by 4 people

    • thesavvyinvester says:

      “If Trump can achieve his health care reform, deregulation agenda, tax cut and infrastructure program this year, we will witness economic growth that we haven’t seen since the roaring 1920s in this country. We may even see budget surpluses again. ”

      Fin, you forgot unleashing the Fracking Revolution, and if PDJT can get the FDA out of the way and fast track the 4000 drugs waiting to get approved some of which could be game changers ;-). IMHO that adds up to a greater boom than Clinton’s so called internet revolution which was more about the fungibility of the microchip and software that allowed us to reinvent work. So Clinton’s economy grew on avg 3.78% GDP and if Larry Kudlow is right and we see 6% with PDJT ( I think that is low ) where will the markets be from here given Clinton’s 3.78% = a 225% increase in the market. Not investment advice any of this but do your own extrapolation, all you can say is wow…

      Like

  9. Willy says:

    Full employment??? Is this a freaking joke?
    Maybe for illegal aliens!!! About 20 – 30 million good paying jobs would bring it down to 10%. The economy has been attacked for decades now and it will take that long to recover, if we can get rid of the ILLEGAL FREAKING ALIENS and H1abcdefghi foreign slave labor.

    Liked by 4 people

  10. I often get a sense that all these billionaire men, who in essence have given up their lives and retirements for us, for America, are in turn wanting to make us, “metaphorically”, billionaires by extension by saving our great Republic and in return saving us. We are billionaires because their gift to us is priceless. America! “Freedom on” my friends!

    Liked by 10 people

    • Dekester says:

      Great post. Who among those billionaires need their respective positions? My thinking is none.
      This is something I never hear mentioned.

      Liked by 4 people

      • I think, no, I know those men along with Trump/Trump45 love us, love the USA like we do, and don’t want to lose her, just like we don’t want to lose her!

        And by extension, I deeply believe this is the way First Lady Melania feels too. I can attest to the fact when you are not Graced by being born here in the USA but are Graced by becoming a citizen here, the passion and fire in your heart is unbridled! I love this country heart and soul, always have (as a little girl) always will!

        Liked by 7 people

      • justfactsplz says:

        The elephants and donkeys are saying “what kind of animal are they, these that work for the people and don’t need money and cannot be corrupted?”. And the lions just say “carry on to each other”. Their reward is MAGA.

        Liked by 1 person

    • Rebnstx says:

      Georgia Grace, you have made me cry. Absolutely come to tears. Hard to do for me. I was thinking as I look at these men that have answered the call to save our beloved nation. I feel blessed & rich already. May the courage spread throughout our land & across the globe. God be with us.

      Liked by 4 people

      • What a beautiful thing to say Rebnstx…im right there along with you in tears. Knowing how much God loves us, gave us Trump45 to save us…i am often brought to both smiles and tears by the Majesty of it all…and we are living the history books.

        God IS definitely with us, in this be sure, and above all TRUST. God bless💖

        Liked by 3 people

      • dabrack says:

        With Trump and his guys standing for us, it is our job to drain the rest of the swamp and grade it to a nice gentle slope for run-off. Elites in America are under attack and those elsewhere will be soon I expect.
        But don’t be overconfident, there is lots of work to do and it is our’s. If we work hard for the next four elections we may save America.

        Liked by 1 person

  11. Southpaw says:

    I have read this theory many times in the past weeks. May I assume the two economies were equal when they began? As they traveled north I95 grew and I75 contracted. As they reverse course Main Street will expand but will Wall Street contract?

    Liked by 1 person

  12. Illegal says:

    More fake economic news from Yahoo. One month does not equate to a trend. The economic numbers have always been manipulated by the Fed. To use any of these numbers is bogus without an understanding of what is driving the numbers.

    Liked by 1 person

    • sundance says:

      Relax Francis. No one is talking “trends”. The comparative is year over year. Comparing Feb ’17 to Feb ’16 for Wage Rates..

      Liked by 3 people

    • Willy says:

      Check ‘Shadowstats’ for real unemployment numbers, run the way they were when I was employed. Nearly 100,000,000 working age people without jobs is not ‘nearly full employment’!

      Liked by 1 person

      • dabrack says:

        Full employment will keep getting harder and harder to achieve as technology constantly leaves low skilled workers behind. Driverless vehicles will drive transportation workers to their knees. So trade schools for thinkers not just welders are needed now. We will need lots of health care workers applying the services not just administrators. Nursing and sales jobs will not be shipped overseas or replaced soon with automation. So the high school grad must be convinced his education is still incomplete. Very few will be able to start working at the mine or factory and stay there the rest of their life.
        And I do not think Universities are very crucial to our national well being. Trade schools for accountants, programmers, technicians for all face to face with the customer will fly high.

        Liked by 1 person

    • jeans2nd says:

      “To use any of these numbers is bogus without an understanding of what is driving the numbers.”

      Yes, and all analysis up till now has been driven by globalist economic theories. Those globalist economic rules no longer apply. Welcome to our brave new world.

      Liked by 1 person

  13. quintrillion says:

    This is great info. Every time you post this I read it again. TY.

    Liked by 4 people

  14. dabrack says:

    During the stagflation on the 1970’s few companies offered enough to keep the star employees. You could stay for 2% raise or move for 12% increase.

    Like

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