The gap between Wall Street and Main Street cannot persist indefinitely.
Commentary
Inflation saw a slight decrease in May, with the consumer price index rising by 3.3 percent, down from 3.4 percent in April. Economists may be pleased with this slower growth in prices, but American households are feeling the strain. The cost of groceries and other essentials has risen by over 20 percent in the past three years, with no sign of relief in sight. Increases in energy, transportation, and housing costs since 2020 have been even more significant, impacting the daily lives of many Americans.
Consequently, the American consumer, traditionally a driving force behind economic growth, is losing momentum. Households are relying on credit cards and depleting savings to cover their expenses.
Related Stories
Despite officials claiming a robust job market with positive job creation numbers, most new jobs—and the overall employment figures—tend to be lower-paying part-time positions. Over the past year, the economy has lost 1.1 million full-time jobs, while gaining 1.5 million part-time positions. This shift raises concerns about the quality of employment opportunities available.
Immigration, particularly illegal immigration, has contributed marginally to job growth at the lower end of the market, but at the expense of native workers. U.S. unemployment rates, while below levels typically associated with a recession, are on the rise. May’s unemployment rate of 4 percent marks a 17.6 percent increase from April 2023 and surpasses 2019 levels. Real wages, adjusted for inflation, have remained stagnant compared to pre-COVID-19 pandemic levels. This stagnation indicates that working and middle-class Americans are struggling to maintain financial stability.
The stock markets, however, appear disconnected from these economic realities. Continuously reaching new all-time highs, the markets suggest an optimistic outlook. For instance, the total U.S. market capitalization to GDP ratio, currently at 188 percent, has been at its highest level on record since 2020. Whether these elevated levels are justified by technological innovations like artificial intelligence is debatable. It is more likely a result of increased money supply, excess liquidity, asset price inflation, and a hopeful optimism that the good times will continue.
The ongoing disparity between Wall Street and Main Street cannot be sustained indefinitely. The economy must either catch up to the current market valuations, or market values for equities, real estate, and other assets will need to be recalibrated.
The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of The Epoch Times.
Please rewrite the paragraph for me.
Source link
