‘People have gotten poorer’: Top Wall Street exec claims the average American's standard of living has declined under Biden, with the working and middle classes hurt the most. Do you agree?
Growth in the U.S. economy appears to have decelerated. According to the advance estimate from the Commerce Department, real GDP increased at an annual rate of 1.6% in Q1 of 2024 — down from a 3.4% growth rate observed in Q4 of 2023.
According to Jason Trennert, chairman and CEO of Strategas Securities, the average American isn’t doing as well as before as they continue to grapple with rising price levels.
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A recent op-ed by The Wall Street Journal’s editorial board highlighted that inflation-adjusted hourly earnings stood at $11.40 in constant 1982-84 dollars when President Joe Biden took office; they have since dropped to $11.11 in March 2024, indicating that workers are now earning less in real terms than before.
“The average person's standard of living has declined, real wages may have started to increase slightly in the last couple of months, but it's the cumulative effect of inflation that people are responding to,” Trennert said in a recent interview with Fox Business. “That's why the confidence is so low. That's why people are so grumpy, despite the fact that you're close to full employment. People have gotten poorer.”
The labor market indeed appears robust in the U.S., with the unemployment rate standing at just 3.8% in March 2024.
However, not everyone is optimistic about the economy. In a recent Economist/YouGov poll of U.S. adults, 53% said the economy is “getting worse,” 24% said it is “about same,” and only 18% responded that it is “getting better.” Nearly 60% of Americans disapprove of Biden's handling of the economy, according to an average of various recent polls calculated by RealClearPolitics.
‘Common man’ CPI
Headline inflation has subsided in the U.S. but is still stubborn. In March 2024, the U.S. consumer price index saw an annual increase of 3.5%, down from its peak 9.1% increase registered in June 2022, but higher than February's figure and higher than expectations.
"This is the weakest performance for the U.S. economy since the undeclared recession in the first half of 2022, and it’s a noticeable softening from 4.9% growth in the middle of 2023," said the Wall Street Journal op-ed.
Core CPI, which excludes volatile food and energy prices, rose 3.8% from a year ago.
However, Trennert uses a different measure — one that may better portray the situation faced by the average person.
In 2022, Strategas Research Partners developed a “Common Man” CPI, an index composed of essential items people must buy, rather than what they might buy.
“We've created this Common Man CPI, which is the opposite of core, it's stuff that's really core — it's food, it's inflation, it's housing, it's clothing, insurance and utilities,” Trennert said, adding that this measure has “grown faster than wages by about 8% over the past three years.”
When the prices of necessities increase substantially faster than wages, it does not bode well for the working class.
“... inflation is the tax that hurts the working classes and middle classes the most. Wealthy people don't notice it, but the average person notices that every day," Trennert remarked. He blamed the current inflationary environment on the Biden administration's borrowing habits and "no co-ordination between monetary and fiscal policy."
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Rich resilience
Indeed, the wealthy can experience a markedly different fate under inflation.
In January, the non-profit Oxfam reported that the world’s billionaires have become $3.3 trillion wealthier than they were in 2020, with their wealth increasing at a rate three times faster than that of inflation.
The report painted a starkly different picture for the working class, noting that individuals are working harder and longer hours but struggle to match the pace of inflation.
“The wages of nearly 800 million workers have failed to keep up with inflation and they have lost $1.5 trillion over the last two years, equivalent to nearly a month (25 days) of lost wages for each worker,” the report states.
The total net worth of the wealthiest 1% in the U.S. hit $44.6 trillion at the end of 2023, according to Federal Reserve data, which marked a new record and a nearly 50% jump from the first quarter of 2020.
The reality is, while the working class struggle to keep pace with inflation, billionaires have been able to grow their wealth faster than the pace of inflation through a combination of assets and strategic investments.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
