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<ul><li>According to the International Labour Organisation’s India Wage Report, the average annual wage growth from 1993-94 to 2011-12 was 3.7%, while <keyword id="35050" type="CITY" weightage="20" keywordseo="gdp">GDP</keyword> grew at a yearly rate of 7%. </li><li>By 2011-12, the overall daily wage in India was around ₹247, while casual workers, estimated to total 62% of the total workforce, only earned ₹143 a day. </li><li>It does bear mentioning, however, that the gender wage gap has decreased from 48% in 1993-94 to 34% in 2011-12. </li></ul>When India opened up its economy in 1991, the goal of the policy was clear: to accelerate <keyword id="47276" type="PERSON" weightage="20" keywordseo="Economic-growth">economic growth</keyword>. Two decades, later, it seems that India’s financial liberalisation - which comprised a surge in foreign investment, a reduction in tariffs and deregulation- has had its intended effect on India’s GDP and then some. However, a recent <a href="https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---sro-new_delhi/documents/publication/wcms_638305.pdf">report</a> by the International Labour Organisation shows that this growth hasn’t been inclusive, indicated by the fact that wage growth in India has significantly trailed economic growth from 1993-94 to 2011-12. Over the period in question, the average annual growth in <keyword id="6356975" type="UNKNOWN" weightage="20" keywordseo="wages">wages</keyword> was a mere 3.7% compared to the 7% average yearly growth in India’s GDP. On a cumulative basis, India’s GDP grew by four times in the last two decades, while real wages only doubled. Interestingly, most of the increase in wages came in the last 8 years. This sluggish wage growth has contributed to a rise in inequality and exacerbated the economic divide between rural and urban areas. The daily wage in urban centres in India is still double that of rural areas, indicating a lack of good-quality jobs in rural regions of the country. By 2011-12, the overall daily wage in India was around ₹247, while casual workers, estimated to total 62% of the total workforce, only earned ₹143 a day. Additionally, nearly half of India’s workforce is estimated to be employed in the agricultural sector, a sector that has consistently trailed others in terms of output growth and productivity. The report did show a few positive changes. Rural wages increased at a faster pace than urban wages. Additionally, wages for female workers also increased at a faster pace than wages for male workers. However, this is largely due to the fact that both rural wages and female wages had a low base from which to grow from. It does bear mentioning, however, that the gender wage gap has decreased from 48% in 1993-94 to 34% in 2011-12. The <keyword id="6456249" type="UNKNOWN" weightage="20" keywordseo="ilo">ILO</keyword> suggested a number of ways to reduce the level of wage inequality such as the continued revision of minimum wage laws, the improved collection of worker data by government agencies, the formalisation of the informal sector and the implementation of skilling programmes to improve labour flexibility and productivity.

India's wage growth significantly trails economic growth, says the ILO

<ul><li>Former <keyword id="1841448" type="ORGANIZATION" weightage="60" keywordseo="Fed-chair">Fed Chair</keyword> <keyword id="108557" type="PERSON" weightage="60" keywordseo="Alan-Greenspan">Alan Greenspan</keyword> told Bloomberg that the US is entering a period of slowing <keyword id="47276" type="PERSON" weightage="60" keywordseo="Economic-growth">economic growth</keyword> due to a decrease in <keyword id="23080" type="COMPANY" weightage="60" keywordseo="productivity">productivity</keyword>. </li><li>The aging of the population and an increase in social security benefits is contributing to this productivity slowdown, he said. </li><li>"I'm very much concerned about this and I don't know how we're going to get out of it very quickly," Greenspan said. </li></ul><ul><li><a href="https://www.businessinsider.com/?hprecirc-bullet?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingestm=ingest">Visit Business Insider's homepage for more stories</a>.</li></ul>Alan Greenspan told Bloomberg on Wednesday that <keyword id="2067135" type="PERSON" weightage="60" keywordseo="productivity-growth">productivity growth</keyword> has slowed "dramatically" in the US and the <keyword id="34412" type="ORGANIZATION" weightage="100" keywordseo="economy">economy</keyword> will soon take a hit from this. "Productivity in the most recent data is at 1% a year. That is down very significantly from earlier periods and it's beginning to show up in ways which suggest the intermediate period ahead of us is going to be a period of slow economic growth," the former chairman of the <keyword id="6355253" type="UNKNOWN" weightage="60" keywordseo="federal-reserve">Federal Reserve</keyword> said.Greenspan said that the aging of the population is causing an increase in social security benefits, which is slowing the rate of saving, driving capital investment down, and slowing productivity.Read more: <a href="https://www.businessinsider.com/investing-trading-strategy-jim-rogers-8-rules-for-big-returns-2020-10">Market wizard Jim Rogers started trading with $600 and now has a reported net worth of $300 million. He shares the 8 trading rules that ensured his success.</a>"If you curtail gross domestic savings, you will also curtail gross domestic investments, which is the key to economic growth, because fundamentally it generates all of the economic activity that we get in the capital good <keyword id="31671" type="CITY" weightage="60" keywordseo="markets">markets</keyword>," Greenspan said. "So I'm very much concerned about this and I don't know how we're going to get out of it very quickly."Greenspan called the aging of the population a "fundamental issue" in the economy. He said this is a problem that is not going to "ultimately disappear" as the coronavirus will.

Former Fed Chair Alan Greenspan says the US is entering a period of slow economic growth on lowered productivity

<ul class="summary-list"><li><a href="https://markets.businessinsider.com/stocks/jpm-stock">JPMorgan</a> is the latest Wall Street bank to slash its forecast for US <keyword id="47276" type="PERSON" weightage="60" keywordseo="Economic-growth">economic growth</keyword> because of weakened hopes for near-term stimulus.</li><li>The bank on Thursday lowered its fourth-quarter 2020 estimate to 2.5% from 3.5% and cut its first-quarter 2021 growth forecast to 2% from 2.5%.</li><li>The lack of fresh fiscal aid has an "immediate impact" on household incomes and will drive a contraction in disposable income into 2021, Michael Feroli, the bank's chief economist, said in a note.</li><li>JPMorgan projected that the absence of a new stimulus measure would also lower the 2021 federal deficit to $2 trillion from $3.5 trillion.</li></ul>Dwindling odds of a new stimulus deal are driving economists to tamper expectations for US economic growth. <a href="https://markets.businessinsider.com/stocks/jpm-stock">JPMorgan</a> on Thursday became the latest Wall Street giant to follow suit.Michael Feroli, the bank's chief economist, lowered his gross-domestic-product estimates for the fourth quarter of 2020 and the first quarter of 2021. The US <keyword id="34412" type="ORGANIZATION" weightage="60" keywordseo="economy">economy</keyword> will expand by 2.5% in the final quarter of 2020, he wrote in a note, down from the firm's previous forecast of 3.5% growth. First-quarter growth will reach 2%, down from the prior 2.5% estimate.Household incomes will see the "most immediate impact" from the lack of additional fiscal aid, Feroli said. Another spending package would drive a 24% annualized increase in disposable income through a second round of relief checks and the resumption of expanded unemployment benefits, according to the bank. But the lack of a near-term bill would drive a 12% contraction in disposable income next quarter.Read more: <a href="https://www.businessinsider.com/stock-market-investing-tips-global-growth-fund-manager-sunil-thakor-2020-9" target="_blank" rel="noopener">Sunil Thakor's global stock fund has returned more than 500% to investors since 2009 by precisely targeting high-growth companies. He explains how he finds long-term winners in a 'sweet spot' that minimizes risk.</a>An encouraging trend in households' saving activity kept JPMorgan from lowering its <keyword id="1067837" type="PERSON" weightage="60" keywordseo="GDP-estimates">GDP estimates</keyword> further, the note said. The personal savings rate fell to 18% in July after peaking at 34% in April, and the firm expects a reading of 15% for August. Should job growth continue its upward trajectory this month, Americans may shift some of their saving to spending and lift growth in the fourth quarter, Feroli said.The absence of a new stimulus bill has its upsides, the economist added. JPMorgan lowered its 2021 fiscal-deficit estimate to $2 trillion from $3.5 trillion, citing the lack of a deal. The forecast stands to change before the year is out, as the presidential election could change the outlook for federal spending plans.A "blue wave" would likely prompt greater spending, and even a divided government would likely lean toward larger deficits over slashed spending, Feroli said.Read more: <a href="https://www.businessinsider.com/investment-advice-market-drivers-where-to-put-money-brent-schutte-2020-9">Northwestern Mutual's chief strategist told us the 6 market drivers he's watching most closely amid the volatility — and broke down where he's putting his money over the next 9-12 months</a>Congress has largely shelved plans for a new relief bill. Republicans have shifted their focus to filling the Supreme Court vacancy left by Justice Ruth Bader Ginsburg's death. Legislators on both sides of the aisle are also rushing to pass a spending measure to avoid a government shutdown.Still, some hope remains for stimulus progress ahead of the November election. Treasury Secretary Steven Mnuchin indicated on Thursday that new aid was "still needed" and told legislators he remained in talks with House Speaker Nancy Pelosi on passing a measure. Separately, House Democrats moved forward with a $2.4 trillion proposal that includes funds for American families, airlines, and restaurants.JPMorgan's updated forecast meets projections made by its Wall Street peers in recent weeks. Goldman Sachs economists on Wednesday cut their fourth-quarter estimate <a href="https://www.businessinsider.com/economic-outlook-q4-gdp-halved-stimulus-deadlock-congress-goldman-forecast-2020-9">to 3% from 6%</a>, similarly citing a lack of new stimulus before the end of the year.<a href="https://markets.businessinsider.com/stocks/bac-stock">Bank of America</a> lowered its estimate <a href="https://markets.businessinsider.com/news/stocks/economic-outlook-gdp-estimates-bank-america-stimulus-bill-recovery-quarter-2020-9-1029582684">to 3% from 5%</a> in early September after calling stalled relief negotiations a "speed bump" for the nation's economic recovery.Read more: <a href="https://www.businessinsider.com/multifamily-real-estate-investing-strategy-advantages-of-syndication-bruce-petersen-2020-9">Bruce Petersen spent 18 years in the retail industry before amassing a real estate portfolio with nearly 1000 units. Here's the investing strategy he's using that's 'head and shoulders better' than a traditional approach.</a>

JPMorgan slashes its forecast for US economic growth amid a lack of new stimulus

<ul class="summary-list"><li><a href="https://markets.businessinsider.com/stocks/gs-stock">Goldman Sachs</a> halved its outlook for fourth-quarter <keyword id="47276" type="PERSON" weightage="60" keywordseo="Economic-growth">economic growth</keyword> after changing its base case to include a lack of new stimulus until 2021.</li><li>The bank's economists lowered their <keyword id="6354971" type="DEFINITION" weightage="60" keywordseo="gross-domestic-product">gross domestic product</keyword> forecast to 7% growth from 6% on a quarter-by-quarter basis in a Wednesday note.</li><li>The lack of new fiscal support will push disposable income to pre-pandemic levels and lower consumer spending through the end of the year, Goldman said.</li><li>Still, the bank modestly lifted its <keyword id="35050" type="CITY" weightage="60" keywordseo="gdp">GDP</keyword> estimates for the second, third, and fourth quarters of 2021, citing new stimulus being passed in the new year and the arrival of a coronavirus vaccine.</li></ul>Congress has mostly given up on passing another stimulus bill before the US presidential election, and <a href="https://markets.businessinsider.com/stocks/gs-stock">Goldman Sachs</a> sees the lack of fresh aid dragging on fourth-quarter growth.Economists led by Jan Hatzius lowered their fourth-quarter gross domestic product forecast to 3% from 6% on a quarter-over-quarter basis after incorporating the lack of a near-term relief package into their base case. The bank expects the withdrawal of stimulus programs to pull households' disposable income back to pre-pandemic levels and weigh on consumer spending through the end of 2020.Continued job growth will lift private income, but gains will be overshadowed by the drop in stimulus support, the team said in a note to clients. The updated forecast arrived before weekly jobless claims data published Thursday showed continued pain in the labor market. Filings for unemployment benefits climbed to 870,000 for the week ended Saturday, landing above the 840,000 filing estimate.Read more: <a href="https://www.businessinsider.com/stocks-to-buy-6-covid-19-second-wave-ryan-giannotto-2020-9">A Wall Street expert breaks down why these are the best 6 stocks to own for a second coronavirus wave in addition to the FAANMGs</a>The economists previously expected Congress to pass a $1 trillion stimulus package by the end of September that would include another expansion of unemployment benefits and additional funds for the Paycheck Protection Program.Those hopes have since been dashed as legislators shift their focus to the filling the Supreme Court vacancy and avoiding a government shutdown. Goldman now sees stimulus being passed in early 2021, if at all.Some of the economic growth set to be lost in the fourth quarter will bleed into the new year, according to the team. Goldman raised its GDP forecast for the second quarter of 2021 to 7% from 6% on a quarter-over-quarter basis. Estimates for the third and fourth quarters of 2021 were lifted to 4.5% and 3.5%, respectively."We are more confident that widespread distribution of a vaccine to the full population will be achieved by Q2 rather than Q1 of next year," the team wrote, citing a report from <a href="https://www.washingtonpost.com/health/2020/09/22/fda-covid-vaccine-approval-standard/">The Washington Post</a> revealing stricter regulatory standards for approving a vaccine.Other Wall Street giants recently incorporated a lack of new stimulus into their growth forecasts. Bank of America <a href="https://markets.businessinsider.com/news/stocks/economic-outlook-gdp-estimates-bank-america-stimulus-bill-recovery-quarter-2020-9-1029582684">lowered its fourth-quarter growth estimate to 3%</a> from 5% in early September, calling stalled negotiations a "speed bump" for the US economic recovery."As evident in prior rounds of stimulus, bipartisan cooperation is critical. And with the 2020 presidential election less than two months away, partisanship is only growing," the bank's economists wrote in a note.Read more: <a href="https://www.businessinsider.com/stocks-to-buy-on-the-dip-3-companies-marc-chaikin-2020-9">A Wall Street expert explains why the market's ongoing turbulence could end within 2 weeks — and pinpoints 3 stocks to grab cheaper now as big investors buy the dip</a>

US 4th-quarter economic growth will be cut in half if Congress fails to pass more stimulus, Goldman Sachs says

<div class="image-container float_right" style="width:480px"><div class="image"><a href="http://commons.wikimedia.org/wiki/File:Bolitas_%282186855706%29.jpg">Wikimedia Commons</a></div></div>Although the market celebrated today’s releases on weekly unemployment claims and the ISM Manufacturing Index, the trajectory of this weak economic recovery has probably not changed. Both of these indicators are affected by the difficulty the government has in gauging the seasonal adjustment factors in this part of the year as a result of the timing of the annual auto industry shutdowns for re-tooling. In our view the 1st and 2nd quarter GDP results offer a much more representative outlook for an <keyword id="34412" type="ORGANIZATION" weightage="60" keywordseo="economy">economy</keyword> that seems to be losing steam rather than picking up as most observers believe.
The unexpectedly large increase in the ISM Index was propelled mainly by a 6.4% rise in orders and an 11.6% jump in production. On a seasonally unadjusted basis the respective increases were -1% and +2%. While these were both better than usual for July, the seasonal adjustments, as compared to the past, seem unusually generous, and the reported number is most likely an outlier that also appears inconsistent with most other economic reports. Similarly, the weekly unemployment claims number is usually choppy in July, and we would take it with grain of salt unless it is confirmed in subsequent weeks.
The GDP results for the first half are a more accurate indicator of how weak the economic recovery has become. While 2nd quarter growth of 1.7% was a mild upward surprise over expectations, 1st quarter growth was marked down to 1.1% from a previously reported 1.8% and a preliminary report of 2.4%. Even so, there is reason to believe that the 2nd quarter was actually weaker than the 1st. An unexpectedly large rise in inventories accounted for 24% of 2nd quarter growth, while consumption was up only 1.2%, compared to a still anemic 1.5% in the prior quarter. Final demand was up only 1.3% in the 2nd quarter and 0.3% in the 1st. The need to work off the excess inventories will tend to impede second half growth. In addition government spending was down less than expected, indicating that further layoffs related to the sequester are still ahead. We note that GDP would have to rise 3.5% in the 2nd half in order to meet the Fed’s last forecast.
Another factor to consider is that nominal 2nd quarter GDP growth of 2.39% was actually lower than the 2.83% reported in the prior quarter. The adjusted result was based on applying a price deflator of only 0.71% in the 2nd quarter, down from 1.67% in the 1st. Had the same deflator been used in the 2nd quarter, real GDP growth would have been only 0.7%.
In assessing the prospect for growth, it is also important to mention the much-discussed concept of “stall speed”, the point at which the economy can no longer maintain momentum and, therefore, falls into recession. In post-World War II recoveries whenever the 4-quarter growth rate of GDP has declined to below 2% the economy has gone into recession within a short time. In this regard, it is noteworthy that 2nd quarter GDP growth was only up 1.4% from a year earlier. This does not bode well for the widely expected pickup in the 2nd half, particularly in view of the headwinds from the coming political fight over the budget and debt limit, the possible tapering of QE, and the numerous problems facing the global economy.
In our view the stock market is overvalued, overly bullish and in a state of denial about the shaky economic recovery. We believe that the potential for a severe downturn is too great to ignore.

Economic Growth Momentum Is Fading

<ul class="summary-list"><li>The <keyword id="11896136" type="UNKNOWN" weightage="60" keywordseo="pandemic" source="Orion">pandemic</keyword> has widened <keyword id="11893571" type="UNKNOWN" weightage="60" keywordseo="inequality" source="Orion">inequality</keyword>, hitting vulnerable workers hard while making the rich richer.</li><li>Amid this, experts are wary of looking only at overall growth to assess <keyword id="11948642" type="UNKNOWN" weightage="60" keywordseo="economic-recovery" source="Orion">economic recovery</keyword>.</li></ul>Nearly two years into the coronavirus pandemic, the world eagerly awaits predictions of when - and how - the <keyword id="11893570" type="UNKNOWN" weightage="100" keywordseo="economy" source="Orion">economy</keyword> will recover from its largest shock since the Great Recession.By some indicators, that recovery is already well underway.<a href="https://www.brookings.edu/research/11-facts-on-the-economic-recovery-from-the-covid-19-pandemic/">US gross domestic product</a> (GDP) returned to its pre-pandemic levels in the second quarter of 2021, sooner than economists' expectations. <a href="https://thehill.com/policy/finance/573667-us-household-wealth-rises-to-record-federal-reserve-say">Household wealth reached a record high</a> in September.For some, such indicators are reassuring: A recent survey by accounting firm KPMG found that CEOs of the world's biggest companies are already back to their <a href="https://www.reuters.com/world/the-great-reboot/ceos-back-pre-pandemic-levels-confidence-kpmg-survey-shows-2021-08-31/">pre-pandemic levels of confidence</a> in the global economy.But many experts worry that people have focused too much on the overall economy - and not enough on how those hit hardest are doing. "There's too much reporting that everybody is doing just fine and everybody's flush with cash and everybody's doing well, and that's simply not true," Sylvia Allegretto, a labor economist and co-chair of the University of California Berkeley's Center on Wage and Employment Dynamics, told Insider."There are a lot of people that are slipping through the cracks, that are being kicked out of their homes and their apartments that never did have much spending. Those people are not doing well and their children are not doing well, and that isn't being reported on very much," she said.Women and people of color, hit hardest at the pandemic's start, have also largely been <a href="https://www.businessinsider.com/jobs-for-women-people-of-color-still-behind-economic-recovery-2021-7">left out of the recovery</a> thus far - with Black and Latino workers still experiencing higher-than-average unemployment rates. <a href="https://www.businessinsider.com/labor-market-low-wage-minority-workers-hardest-hit-fed-study-2021-2">Workers making less than $30,000 per year</a> were laid off by employers at higher rates.At the same time, <a href="https://www.businessinsider.com/number-of-billionaires-in-world-grew-pandemic-wealth-tax-2021-9">global billionaires' combined wealth</a> has grown by $10 billion during the pandemic, roughly 5.7%.Amid this disparity, multiple economists told Insider that metrics like GDP paint a misleading picture of economic health."If there's a huge burst in GDP and almost all of it goes to Jeff Bezos, we look like we made progress, but it's not a lot of progress for most people," said Manuel Pastor, an economist and sociologist who leads the University of Southern California's Equity Research Institute.Allegretto said GDP doesn't help explain events that generate economic activity but actually hurt society. "The problem with GDP is GDP goes up when you crash your car. If you get hurt and go to the hospital, it goes up even more," she said.As a result, economists are increasingly turning to metrics that capture not just overall <keyword id="11916717" type="UNKNOWN" weightage="60" keywordseo="economic-growth" source="Orion">economic growth</keyword>, but how economic gains are being distributed."We recognize the importance not only of growing the overall pie in GDP, but also how that pie is distributed," Indhira Santos, who leads the World Bank's labor and skills research within its Social Protection &amp; Jobs Global Practice, told Insider.A common way to measure this is the <a href="https://www.census.gov/topics/income-poverty/income-inequality/about/metrics/gini-index.html">Gini index</a>, a simple measure of income inequality in a country. A Pew Research report in noted that the US <a href="https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/">already had the highest Gini number</a> among the Western G-7 countries in 2017.But Pastor said there's a growing number of "equity metrics," including the <a href="https://sustainabledevelopment.un.org/index.php?page=view&amp;type=99&amp;nr=266&amp;menu=1449mp;menu=1449">gross happiness index</a> and the <a href="https://gnhusa.org/genuine-progress-indicator/">genuine progress indicator</a>, which attempt to capture a wider range of economic and social activities.The genuine progress indicator, Pastor said, accounts for unpaid labor like caring for family or community members, which during the pandemic has been "quite important but hasn't been evaluated."Santos said the World Bank, for its part, is looking at income growth for the top 60% of a country compared to the bottom 40%, in hopes of gaining a more nuanced understanding than what the Gini index offers.Ultimately, according to Allegretto, "the increased inequality that's been reported is only going to get worse, so we should be looking at the bottom."

The latest data on the economy say it's totally recovered, but it still feels like a struggle for the working poor, experts say

<ul class="summary-list"><li>US <keyword id="12289424" type="UNKNOWN" weightage="60" keywordseo="gross-domestic-product" source="Orion">gross domestic product</keyword> grew at an annualized rate of 6.9% in the fourth quarter of 2021.</li><li>That exceeded the median estimate of a 5.5% jump and was a huge pickup from the prior quarter's 2.3% growth.</li></ul>The US economic recovery picked up the pace in the last months of 2021 as the Delta wave faded and the Omicron variant became the latest threat to the rebound.The country's gross domestic product grew at an annualized rate of 6.9% through the fourth quarter of last year, the <a href="https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-advance-estimate">Commerce Department</a> said Thursday. That came in way above the median forecast of a 5.5% gain from economists surveyed by Bloomberg. It also showed growth accelerating from the 2.3% pace seen in the third quarter.The print reflects the strongest quarter of <keyword id="11916717" type="UNKNOWN" weightage="60" keywordseo="economic-growth" source="Orion">economic growth</keyword> since the third quarter of 2020, when the initial rebound from lockdowns powered the strongest <keyword id="11921644" type="UNKNOWN" weightage="60" keywordseo="gdp" source="Orion">GDP</keyword> reading in US history. The latest acceleration signals the <keyword id="11893570" type="UNKNOWN" weightage="100" keywordseo="economy" source="Orion">economy</keyword> is far more resilient to the Omicron surge than the Delta wave, and hints that growth will remain above trend through 2022.On an annual basis, the US economy grew 5.7% last year. That's the largest one-year expansion since 1984. The print serves as yet another superlative for an extraordinary year of recovery. The country added 6.4 million payrolls through 2021, the largest one-year gain in history. The outstanding expansion had its drawbacks, however. Inflation accelerated to four-decade highs, offsetting most of the strong wage growth seen through last year and posing a new risk to the recovery.Several major headwinds continue to hold the recovery back. The fourth quarter saw virus cases rip higher as Omicron's spread intensified, yet the period doesn't capture the worst of the latest wave. Daily virus cases peaked with more than 1.4 million new infections on January 10, and while counts have declined since, the current 7-day average is still roughly twice the level seen at the end of last year. As such, economists won't get the full picture of Omicron's fallout until first-quarter GDP data is published.Tangles in the global supply chain also hindered output, albeit not as much as in the third quarter. The last three months of 2021 saw modest improvements to the supply-chain problem, with key factories ramping up production and shipping delays shrinking. Bottlenecks are "<a href="https://www.businessinsider.com/omicron-january-economy-inflation-supply-chains-labor-shortage-flights-mail-2022-1">easing in all the right places</a>," and it's likely the US is past the worst of the supply mess, JPMorgan economists said in an early January note.Historically high inflation swung even higher in the fourth quarter as supply woes and overwhelming demand continued to drive prices higher. The Consumer Price Index soared 7% year-over-year in December, marking the strongest price growth since 1982. Thursday's preliminary GDP reading signals the elevated price growth did little to hamper growth and showed some signs that the inflation nightmare is easing.The pickup in quarterly output was mostly powered by strong increases in private inventory, exports, consumer spending, and nonresidential fixed investment, according to the report. Retailers and wholesale trade businesses accounted for most of the inventory buildup. That's in stark contrast to earlier in 2021, when businesses' attempts to rebuild inventories crashed into supply chain issues. The improvement suggests firms will better match supply with demand in the year ahead.Declines in federal, state, and local government spending weighed on GDP through the fourth quarter, the Commerce Department said. Imports also accelerated and dragged on the headline growth number.The fourth quarter's robust growth may be the highest print of the recovery moving forward. The Federal Reserve hinted on Wednesday it's prepared to raise interest rates from near-zero at its March meeting as it looks to rein in its support and fight inflation. The central bank's emergency asset purchases are already on pace to end by early March, and higher rates would all but certainly weigh on economic growth.It's a tradeoff that has to be made, according to Fed Chair Jerome Powell. While rate hikes might lead to lower GDP prints, they'll also help cool inflation and keep price growth from presenting a new crisis."In light of the remarkable progress we've seen in the labor market and inflation that is well above our 2% longer-run goal, the economy no longer needs sustained high levels of monetary policy support," Powell said in a Wednesday press conference.

The US economy grew way more than expected in the fourth quarter as Omicron fueled the biggest virus surge yet

<ul class="summary-list"><li>The US <keyword id="11930037" type="UNKNOWN" weightage="60" keywordseo="wealth-gap" source="Orion">wealth gap</keyword> is sapping <keyword id="11916717" type="UNKNOWN" weightage="60" keywordseo="economic-growth" source="Orion">economic growth</keyword>, the <keyword id="14020126" type="UNKNOWN" weightage="60" keywordseo="economic-policy-institute" source="Orion">Economic Policy Institute</keyword> said in a study.</li><li>The top 10% of earners are the only ones to have their income share grow since 1979.</li></ul>Solving the US's massive wealth gap could lead to a huge boost for economic growth, according to a new <a href="https://www.epi.org/publication/inequalitys-drag-on-aggregate-demand/">study</a> from the Economic Policy Institute.<keyword id="11985113" type="UNKNOWN" weightage="60" keywordseo="income-inequality" source="Orion">Income inequality</keyword> has plagued the US <keyword id="11893570" type="UNKNOWN" weightage="100" keywordseo="economy" source="Orion">economy</keyword> for nearly 50 years. The phenomenon first emerged during the postwar era in the 1970s, when surging inflation eroded households' buying power and pulled the US into a period of weak growth and rising prices. The wealth gap's rapid growth slowed in the early 2000s, but there's been no sign of reversal since.That left about 1.5% of economic growth — roughly $309 billion — on the table by the end of 2018, <keyword id="12137116" type="UNKNOWN" weightage="60" keywordseo="epi" source="Orion">EPI</keyword> economists Josh Bivens and Asha Banerjee said in a report published Tuesday. By redistributing wealth from lower-income households to the wealthiest Americans, overall spending slowed and left less fuel for economic growth.Put another way, the government would have to spend about $300 billion on "well-structured" stimulus every year if it wanted to undo the income-inequality drag on growth, according to the report. The reason for the weaker spending has to do with an economic measure known as the <a href="https://corporatefinanceinstitute.com/resources/knowledge/economics/mpc/">marginal propensity to consume</a>. The metric tracks how much of a pay increase a consumer will spend instead of saving it.Lower-earning Americans tend to have a high MPC since they often have a list of things to buy that they haven't been able to afford, meaning they spend a larger share of their earnings when they receive a raise. On the other hand, wealthier Americans, who tend to already have enough money to satisfy most of their day-to-day needs and wants, typically save most of their pay bump, leaving it to sit in savings accounts or financial assets.<div type="image" title="EPI" height="1358" width="1216" msid="91774009" hostid="261"></div>That disparity is behind the decline in demand, the economists said. The share of income going to the top 10% of earners has grown since 1979 while the rest of the population has seen their share shrink, according to the study.At the same time, the top 1% of earners have been saving a larger share of their income. That's left less cash with the Americans with the greatest likelihood to spend it, in turn constraining economic growth by reducing overall spending.Government actions — and inaction — also contributed to income <keyword id="11893571" type="UNKNOWN" weightage="60" keywordseo="inequality" source="Orion">inequality</keyword> over the past several decades, the team said. Policy choices chipped away at workers' bargaining power over the years, leaving low- and middle-income households with less firepower for winning raises. While overall productivity rose 60% from 1979 to 2019, hourly wages for nonsupervisory workers rose less than 14% over the same period."Reduced worker bargaining power in the labor market is a key driver of the rise in income inequality before taxes and spending, which means that policies that build worker power can help offset these trends," Banerjee said. Lawmakers have failed to fight inequality with a more progressive tax-and-benefits system, the economists added. Taxing wealthier households more and using government funds to bolster the social safety net would help close the wealth gap and transfer more cash to those who are more likely to spend it. Congress has also allowed for periods of weak demand to persist without lifting government spending to spur activity, further allowing for the gap to widen."Without policy changes, inequality will likely drag on household spending, further slowing overall economic growth in the future as well," the team said.Reversing the trend will require a serious shift toward pro-worker policies and a greater focus on progressive taxation, according to the report. In today's 50-50 split Senate, it's unlikely either will arrive in the near term. But as fears of slowing economic growth and potential recession loom, tackling income inequality could be one way to juice spending and boost growth.

You Searched For "Economic growth" and got 8 results

India's wage growth significantly trails economic growth, says the ILO

Dilsher Dhillon

Former Fed Chair Alan Greenspan says the US is entering a period of slow economic growth on lowered productivity

Emily Graffeo

JPMorgan slashes its forecast for US economic growth amid a lack of new stimulus

Ben Winck

US 4th-quarter economic growth will be cut in half if Congress fails to pass more stimulus, Goldman Sachs says

Ben Winck

Economic Growth Momentum Is Fading

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The latest data on the economy say it's totally recovered, but it still feels like a struggle for the working poor, experts say

Tyler Sonnemaker

The US economy grew way more than expected in the fourth quarter as Omicron fueled the biggest virus surge yet

Ben Winck,Madison Hoff

The massive gap between rich and poor Americans costs the US economy more than $300 billion every year, study says

Ben Winck

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