Will economic growth equal wage growth? That’s the biggest economic question of 2014. Like everyone, I was uplifted by today’s news that third quarter GDP figures were revised upward from 3.6 percent to a whopping 4.1 percent. What’s particularly good news is that unlike growth that comes from the restocking of depleted inventories—which basically tells you how weak things were in the sense that businesses unsure of demand wait till the last-minute to restock shelves—this revision was due to, gasp, consumer consumption. Personal consumption was revised up from 1.4 percent to 2.0 percent, thanks to a big jump in consumer spending.
As I’ve written many times, we can’t have a robust recovery in an economy that’s made up 70 percent of consumer spending until people spend more. In the third quarter, we got evidence that they finally are. So, how long until we can stop holding our breaths that we’re finally in a more robust recovery? “I’d say that even one more quarter of better consumer spending would make me feel pretty good,” says Princeton professor and economist Alan Blinder, with whom I spoke this morning.
Now, we just have to hope that job creation starts spreading into the middle, rather than just being at the ends—there are currently plenty of jobs for PhDs and burger flippers, but not so much in between. For more on how salaries and labor markets might shake out in 2014, listen to the latest episode of WNYC’s Money Talking, where I discuss this with Charlie Herman and Bloomberg Businessweek’s Diane Brady.