2/26/08 12:52 PMThe Joyless Economy - New York Times

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OP-ED COLUMNIST

The Joyless EconomyBy PAUL KRUGMANPublished: December 5, 2005

Falling gasoline prices have led tosome improvement in consumerconfidence over the past few weeks.But the public remains deeply unhappyabout the state of the economy.According to the latest Gallup poll, 63percent of Americans rate the economy as only fair orpoor, and by 58 to 36 percent people say economicconditions are getting worse, not better.

Yet by some measures, theeconomy is doing reasonablywell. In particular, grossdomestic product is rising ata pretty fast clip. So whyaren't people pleased withthe economy's performance?

Like everything these days,this is a political as well asfactual question. The Bushadministration seemsgenuinely puzzled that it isn'tgetting more credit for whatit thinks is a boomingeconomy. So let me behelpful here and explainwhat's going on.

I could point out that theeconomic numbers,especially the job numbers,

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especially the job numbers,aren't as good as the Bushpeople imagine. PresidentBush made an appearance inthe Rose Garden to hail thelatest jobs report, yet a gainof 215,000 jobs would havebeen considered nothingspecial - in fact, a bit subpar- during the Clinton years.And because the averageworkweek shrank a bit, the

total number of hours worked actually fell last month.

But the main explanation for economic discontent is that it'shard to convince people that the economy is booming whenthey themselves have yet to see any benefits from thesupposed boom. Over the last few years G.D.P. growth hasbeen reasonably good, and corporate profits have soared.But that growth has failed to trickle down to mostAmericans.

Back in August the Census bureau released family incomedata for 2004. The report, which was overshadowed byHurricane Katrina, showed a remarkable disconnectbetween overall economic growth and the economicfortunes of most American families.

It should have been a good year for American families: theeconomy grew 4.2 percent, its best performance since 1999.Yet most families actually lost economic ground. Realmedian household income - the income of households inthe middle of the income distribution, adjusted for inflation- fell for the fifth year in a row. And one key source ofeconomic insecurity got worse, as the number ofAmericans without health insurance continued to rise.

We don't have comparable data for 2005 yet, but it's prettyclear that the results will be similar. G.D.P. growth hasremained solid, but most families are probably losingground as their earnings fail to keep up with inflation.

Behind the disconnect between economic growth andfamily incomes lies the extremely lopsided nature of theeconomic recovery that officially began in late 2001. Thegrowth in corporate profits has, as I said, been spectacular.

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growth in corporate profits has, as I said, been spectacular.Even after adjusting for inflation, profits have risen morethan 50 percent since the last quarter of 2001. But realwage and salary income is up less than 7 percent.

There are some wealthy Americans who derive a largeshare of their income from dividends and capital gains onstocks, and therefore benefit more or less directly fromsoaring profits. But these people constitute a smallminority. For everyone else the sluggish growth in wages isthe real story. And much of the wage and salary growththat did take place happened at the high end, in the form ofrising payments to executives and other elite employees.Average hourly earnings of nonsupervisory workers,adjusted for inflation, are lower now than when therecovery began.

So there you have it. Americans don't feel good about theeconomy because it hasn't been good for them. Never mindthe G.D.P. numbers: most people are falling behind.

It's much harder to explain why. The disconnect betweenG.D.P. growth and the economic fortunes of mostAmerican families can't be dismissed as a normaloccurrence. Wages and median family income often lagbehind profits in the early stages of an economicexpansion, but not this far behind, and not for so long. Nor,I should say, is there any easy way to place more than asmall fraction of the blame on Bush administration policies.At this point the joylessness of the economic expansion formost Americans is a mystery.

What's clear, however, is that advisers who believe that Mr.Bush can repair his political standing by making speechestelling the public how well the economy is doing havemisunderstood the situation. The problem isn't that peopledon't understand how good things are. It's that they know,from personal experience, that things really aren't thatgood.

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