The housing bubble was fed in part by incredibly bad economic reporting. Reporters should have been reporting on little else since the bubble was so obviously far more important than anything else taking place in the business/economic arena in the years 2002-2207. However, as we know, the vast majority of reporters slavishly followed the lead of Alan Greenspan and other top economists and said that things are just great. They seem to still be following this practice. To counter this "let's spread the good news" cheerleading, let's talk about some really bad news that got almost no attention in the media. last week, the Bureau of Labor Statistics released its employment cost index for the first quarter. The index showed that employment cost (wages and benefits) growth had slowed to just a 1.2 percent annual rate in the first quarter. In the private sector the rate was just 0.8 percent. This is below the current rate of inflation. It also is a sharp slowdown from the prior quarter, which raises the possibility that wage growth will slow even further in the current quarter. If wages slow further, then purchasing power will fall further, thereby slowing the recovery. This is a piece of really bad news that swamps by an order of magnitude the items presented as good news in this and other news articles. (Wage and benefit income accounts for about 60 percent of national income.) If reporters would focus more on reporting the news rather than repeating what the Fed chairman says the public would be much better informed.
--Dean Baker
