[chralieboy]

Precisely.

In Silicon Valley it would be like a company that is raising record amounts of money at mind-boggling valuations but whose revenue isn't growing at the same pace.

One of the major question marks has been wage growth during the recovery. Stock markets have been skyrocketing, but wages have generally remained stagnant.

Similarly, labor participation (i.e. of the people who could work, how many are actively looking/employed) has remained worryingly low. While the US unemployment rate is very low (~5.1%), that isn't a direct inverse of those who are employed. There is a huge group of people who have simply given up trying to find work and others who are working but less than they would like (e.g. part-time, have one job but would like to work another/overtime, etc.)

We see that effect on inflation, which is no where near the 2% level that the Fed would like. Inflation crudely correlates with real growth because it encourages spending; if the money I have will be worth less in the future, I'm more likely to spend it today.

So in effect, we look at the S&P and think "Awesome! We're at all time highs!" But then we look at the economic fundamentals for people and it looks less sketchy.

[igravious]

Don't you mean "more sketchy", as in we look at the S&P and think "Yay" But we are getting dubious signals from the so-called real economy that do not correlate with the signals we are getting from the stock market. Hence, "more sketchy", no?

[curiousgeorgio]

I'd venture to say that our wage and labor problems have less to do with the economy itself and more to do with a shift in global demand and specialization. All of those manufacturing jobs are going to China (whether we like it or not, China's labor costs are probably always going to be more cost effective for business), and the US labor market is demanding more skilled labor. We have an enormous oversupply of unskilled labor that isn't meeting the shift in labor demand.

Instead of using politics and complex tax systems to try and gain back those manufacturing jobs, I wish our government would focus more on helping our workforce adapt to the things where our country can have a competitive advantage in the world: education, technology, engineering, etc.