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Barron's Cover And The Wall Street Journal Reported Alternative Facts

Maybe it's a contagion. Or maybe the Web's transparency just makes it easier to spot. Alternative facts are running rampant, last week across the cover of Barron's, the venerated financial weekly, and in the pages of The Wall Street Journal.

According to Barron’s, consumers "are not opening their wallets." They're shrinking incredibly. That's simply a total mischaracterization of the facts.

Barron's sister publication, The Wall Street Journal, on June 2, made the same inflation mistake in reporting that "weakness in wages has been a mystery." According to The Wall Street Journal, "no one is getting a raise." Actually, the real mystery is their reporting of the facts.

Barron's and The Wall Street Journal ignored the inflation-adjusted figures shown here, which really matter most.

At 3.2%, real consumer spending is just three-tenths of one 1% short of the after-inflation compound annual growth rate of 3.5% achieved in the last economic expansion. Demographic trends explain the three-tenths of 1% difference, with aging baby boomers spending less in retirement, which should be expected.

The data shows that average hourly earnings are accelerating. At 2.5%, May's 12-month growth in average hourly earnings accelerated faster than the 2.1% averaged in the nine-year expansion still under way.

In addition, after adjusting for inflation, average hourly earnings have been accelerating dramatically - hitting all-time highs. Although real wage gains were stagnant for five years post-recession, since 2014, real wages have soared. Wage stagnation - although it is reported on by the media frequently - is a fiction.

Growth in real wages and in real spending by consumers is really important because 69.3% of economic growth comes from consumer activity.

The Standard & Poor's 500 index closed on Friday at 2431.77, just a fraction off its all-time high reached a week earlier. While the stock market could experience a 10% or 15% correction at any time, the market may be reflecting the good conditions, including the booming real growth in the private sector of the U.S economy that is hidden from plain sight.

The private sector is growing at a real annual compounded rate of 3%, considerably faster than the 2.1% after-inflation annually compounded growth rate of the last expansion.

The private sector accounts for 83% of all economic activity in the U.S., making it much more influential than the growth in the government sector of the economy, which accounts for the other 17% of U.S. economic activity.

Consumption and investment by the government sector has actually been shrinking, which is really good news. Declining government economic activity since the recession ended in early 2009 is a drag on overall U.S. GDP growth, and masking the booming 3% real growth in the private sector, which is really good and real news.


This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial advice without consulting a professional about your personal situation.

Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

CAGR means compound annual growth rate.

Government consumption and investment in the GDP accounts does not include government transfer payments.

Average hourly earnings includes 100% of non-farm private employees, and excludes benefits and employers' share of payroll taxes.

May 2017 average hourly earnings of $26.18 adjusted by the personal consumption expenditures deflator (PCED).

March 2006 through December 2008 = 3.4%; CAGR December 2008 through May 2017 = 2.1%. March 2006 average hourly earnings of $20.04 inflated by the personal consumption expenditures deflator (PCED).


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This article was written by a professional financial journalist for The Hogan-Knotts Financial Group and is not intended as legal or investment advice.

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