FedUpUSA

The Tough Math Behind The Economic Recovery

Corporate Cronyism

It should come as no surprise that the stock market is a very poor barometer on the financial health of Americans.  We think of the stock market as a temperature gauge on how well Americans are doing.  If that is the case, the record breaking highs in the stock market should reflect a very happy and well off economy.  That unfortunately is not the case.  There has been a deep structural shift in the last decade which only accelerated since the recession engulfed the nation.  Corporations have increased profits largely by chopping wages and other compensation to employees.  This is part of a global low wage trend that is now fully rolling over the United States.  New data reflects this deeper morphing of our economy and also explains why many working and middle class Americans are finding it harder to keep up with the changing winds of the economy.  Suppressed wages, higher corporate profits, and less compensation.  What you would like to see is profits trickling down into the pocket books of Americans yet that is not the case.

Suppressed wages

Household income continues to have difficulties bouncing back from the current trough:

Median household income

What is important beyond the depression in wages is the number of workers marginally attached to the labor force, unemployed, or simply working part-time for economic reasons.  This remains elevated above 14 percent.  Compare this to 7 percent back in 2000 (an increase of 100 percent for this transient part of our labor force).  So of course, if you can eliminate the higher expenses that come from hiring full-time workers corporate profits are going to increase dramatically.  It also helps to explain some of the recent rise in the stock market.  Yet many Americans own very little stock and also, many of the largest corporations have been expanding and adding jobs overseas while the corporate profits flow to a small group that continues to expand their wealthNot a problem if this was a level playing field but you have the Fed conducting shadow bailouts to a very select group of people while forcing austerity down the throats of most Americans least able to afford it.  This is the nature of the new global marketplace.  It is hard to see this turning around since we are caught in a Catch-22.  Many Americans now out of necessity need cheap goods (47 million of our countrymen and women are on food stamps).  So we are left with the current system where a smaller upper-class is developing, a booming lower class is forming, and the middle class is shrinking like a grape in the sun.

It is important to understand that corporate profits are up as a percent of GDP:

Comp and corporate profits

Correlation is not causation of course but it is hard to dispute the above information when measured with other pieces of data we are seeing.  Americans for the most part are strained.

Read the rest at My Budget 360.

A great site to visit which documents corporate cronyism.

Crony Chronicles

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