I agree with Krugman that when it comes to the economy, we’re mostly worrying about the wrong stuff. Paul stressed jobs over current deficits, but here’s something else to legitimately wring your hands about: real wages—pay adjusted for inflation—are recently in decline for most workers.
What’s that? You thought they’ve been falling for a while? Not so. That is, if you had a job, even though your paycheck probably wasn’t growing much, inflation was low enough that real earnings kept rising through last year.
But lately, with gas and other commodity prices rising more quickly (as opposed to core inflation, which remains tame), there’s been a collision between slower nominal wage growth and faster price growth. As of last month, real weekly earnings were about $13 off their peak last October. That’s over $600 a year for a full-year worker.
Anyway, this has serious implications both for families’ living standards and the overall economy. One of the reasons higher gas prices lead to slower overall growth is because it means people have less to spend elsewhere (and since we import half of the oil we consume, there’s a lot of import leakage here too which doesn’t help either).
More employment and hours worked per week helps—note that weekly earnings grow a little faster than hourly in the chart; that’s a function of increased hours’ growth.
But what would help more is lower unemployment (so Paul’s right to focus on jobs) and more pressure in the job market to induce employers to bid wages up a bit, allowing workers throughout the pay scale to capture more of the economy’s real growth.