Sluggish retail sales are not a bug but a feature of this economy.

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The Wall Street Journal is confused. “The U.S. job market is booming and worker paychecks are getting bigger, but Americans hunkered down on spending last month, a puzzle for an economy that leans heavily on their willingness to consume,” it reports in a story today. U.S. retail sales fell 0.1 percent in February.

This is no mystery.

From the 1940s to the early 1970s, income gains were widely shared by Americans of all brackets. Since the late 1970s, however, spectacular gains have flowed to those at the top. People at the bottom half of income distribution have seen stagnant or declining wages — and, unlike many in the 1 percent, they depend on wages, not investments. The recent slight increases in overall wages do nothing to affect the long-term trend line.

An economy heavily dependent on consumer spending got around this first by having the second adult in a household, entering the workforce, whether voluntarily or not. Second was the magic of consumer debt, a blip on the economy in the 1960s — now $3.9 trillion in consumer credit owed and outstanding in securities alone.

But at some point, adjustment becomes Ponzi scheme — not just with high debt, but the decline of middle-wage jobs and ladders up and entire industries. Jobs are less secure.

Don’t forget the millions financially ruined by the housing crash 10 years ago. Add to these factors the Baby Boomers facing retirement who lack adequate savings — they won’t be spending much. The crumbs of the GOP tax cut going to lower-income Americans are likely to be saved, not spent, based on experience with the George W. Bush cuts.

No wonder consumer spending adjusted for inflation has been growing slower in recent years than the 2000s or the (much higher) 1990s.

Puzzle solved. You’re welcome, Rupert.


Today’s Econ Haiku:

Boeing union folk

Built those 737s

Cower, Chicago