[PEN-L] Stagnant wages

[Eugene Coyle]

A colleague passed along this link, which has an interesting view on "stagnant wages." Gene Coyle Anyone familiar with the Univ Michigan's American Customer Satisfaction Index? http://www.theacsi.org/scores_commentaries/commentaries/Q1_05_comm.htm Some bits -- without the graphs --  from the link: The American Customer Satisfaction Index (ACSI) drops sharply for a second consecutive quarter. With oil prices at near-record levels and inflation-adjusted wages falling, consumers are paying appreciably more for goods and services than they did a year ago. Growing household debt and increasing interest rates make debt servicing more of a burden as well. Rising energy prices are also forcing companies to further trim costs. The combined effect is a decline in service quality, household purchasing ability, and customer satisfaction. ACSI falls to 73.0, a decline of 0.8% compared with last quarter. With the exception of last quarter’s drop, this decline is the largest since 1997. This quarter’s erosion in customer satisfaction adds more uncertainty to the economy. The overall ACSI reflects changes in the nation’s quality of economic output, as experienced by the consumers of that output. The economy’s ability to generate increasing consumer utility is central to economic health and real economic growth. Looking back at the first quarter of 1997, when ACSI suffered a large fall, consumer spending weakened considerably the following quarter. The same is true now. Consumer spending growth for the first quarter was weak following a decline in customer satisfaction in the fourth quarter of 2004. Spending for durables was flat and the only major increases came from energy, housing, and medical care. With the further decline in ACSI, a bounce back in spending next quarter is not likely. Since consumer spending makes up more than two-thirds of GDP, the implications for the economy are downbeat as well. Declining customer satisfaction erodes demand and future economic growth, both for individual firms and for the economy in the aggregate.