What's Good for Workers Is Terrible for Investors

Last week the Washington Center for Equitable Growth reported that 2015 was the best year for real income growth for the bottom 99 percent of income earners since 1998, as the impact of a tightening labor market and deflationary forces from abroad flowed through to workers. Wage data from the first-quarter GDP report suggests that 2016 will continue this trend: Wages and salary accruals as a percentage of GDP reached a seven-year high, and stands higher than at any point during the credit boom years of 2005-6.

What's encouraging for workers is that in both of the last two economic cycles, the wage share of GDP peaked as the economy was tipping into recession, suggesting that this outperformance should continue for as long as this economic expansion does. More encouragingly, the last two cycles ended because of a combination of too much business or housing investment, too much leverage, and overly tight monetary policy. There's still no reason to be concerned about any of those three in this cycle.