The Big Surprise

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I'm amazed this must-read Leonhardt column hasn't gotten more traction. Its thesis is so counter-intuitive it's maybe hard to absorb. Is this recession actually giving average workers a bigger pay-boost than at any time since the Clinton boom? David:

Between the collapse of Lehman Brothers last September and this June, the average weekly pay of rank-and-file workers (who make up 80 percent of the work force) remained stuck at about $612. Hourly pay rose a bit, but the increase was canceled out by a shrinking workweek. Since June with the economy apparently starting to grow again, as Ben Bernanke noted on Tuesday the workweek has grown and hourly pay growth has accelerated. Last month, average weekly pay rose to $618...

The added wrinkle in this recession is that inflation has dropped below zero, thanks largely to a sharp fall in energy prices. In most recessions, inflation remains positive indeed, higher than wage growth, which means that inflation-adjusted pay declines. In this recession, average prices have fallen 2 percent over the past year, while weekly pay has either been flat or risen 1 percent, depending on which data you believe.

So inflation-adjusted pay is up 2 to 3 percent. Amazingly enough, that’s almost as big as the peak increases during the late 1990s boom.

What are the political repercussions of a downturn that is brutal to those who lose their work but lucrative for the big majority who keep theirs'? Discuss.

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