There's a problem with the economy.

Paul Krugman’s Crisis of Confidence column today is excellent. Recent polling shows more Americans feel their economic circumstances declining more than at any time in 44 years. He points out that the traditional measure of American prosperity, rate of change in GDP, masks the fact that the Middle Class is declining even when GDP is rising. I made this point in an earlier post and presented some graphics showing the trend started in 1973 and is getting worse.

PK points out in one of his recent blog posts that changes in the traditional “unemployment rate” mask a long term, persistent increase in underemployment and working age Americans who have given up looking. PK commented favorably there on a similar Floyd Norris blog post with a better graphic. Open the Norris graphic and notice that among men 25-54 the rate of joblessness (i.e. those who for whatever reason are not working) used to fluctuate around a mean of about 7 percent. From 1973 to 1983 it climbed to 15 percent and since then has been fluctuating around a mean of about 12 percent. Something broke in the 1970s and never got fixed.

High joblessness rates and declining median real household incomes may overlap a bit, but one does not fully explain the other. More middle class Americans are without jobs and those who are working are earning less on an inflation-adjusted basis.