Tags: Joel Naroff | economy | mediocre | improving

Economist Joel Naroff: Economy 'Mediocre,' but Improving

Thursday, 24 Jul 2014 02:09 PM

By Dan Weil

The economy appears to be something of a mixed big at the moment.

It shrank 2.9 percent in the first quarter, but recent data have been more encouraging. And many economists expect an expansion of 3 percent or more for the rest of the year.

"The economy is mediocre," Joel Naroff, president of Naroff Economic Advisors in Holland, Pa., and a member of the Newsmax Financial Braintrust Alliance, told CNBC.com. "But it's getting better by the month."

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While the economy added 288,000 jobs in June, and unemployment fell to an almost six-year low of 6.1 percent, wage growth remains sluggish. It totaled only 2 percent in the 12 months through June.

Wages are "the missing link in this whole economic recovery," Naroff said. He said wage gains traditionally lag job increases and expects wage hikes to begin accelerating in the next six months, as employers have to pay up for workers.

When that happens, middle- and lower-class workers should lead the way in boosting consumption, Naroff said. Personal consumption expenditures advanced only 0.2 percent in May.

Meanwhile, Nobel laureate economist Vernon Smith of Chapman University says the bank bailout of 2008-09 has hampered the economy by shielding investors from the consequences of failure.

"The rescue had a hidden cost for the economy that is difficult to quantify but can be crippling," he writes in The Wall Street Journal. "New economic activity is hobbled if it is not freed from the burden of sharing its return with investors who bore risks that failed."

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