Recovery in U.S. Lifting Profits, Not Adding Jobs

[Dugdale_Jukes]

With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as federal budget cuts take hold.

That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers.

“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”

The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

These factors, along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week.

While buoyant earnings are rewarded by investors and make American companies more competitive globally, they have not translated into additional jobs at home.

http://www.nytimes.com/2013/03/04/b...?nl=todaysheadlines&emc=edit_th_20130304&_r=0

This intrigues me for some reason. BofA paid no US taxes in 2011 because they were able to shelter all their funds off-shore - just as a great deal of our multinational corporations have been able to do (some actually able to post a loss here in the US and get a huge return). This same corporation now says that we need a recovery in the labor market to achieve an economic turnaround. If real funds are flowing out of the country faster than they can be printed, where does the money come from to hire a labor force?

We used to trade labor for goods and services, and the production of those goods and services induced investment in the companies producing them. It seems to me that since corporations can sit on their funds now until some politician declares another 1 year 5% tax holiday, they can hold their own stock prices as high as they like by buying up blocks (which they write off as a loss).

Corporate tax rates are at 35%, but I can't seem to find many who actually pay that much. Many companies (like Google and Facebook for instance) hide their funds in Ireland which had a 12% tax rate. These companies are moving their headquarters to Poland now that Ireland realized that a PO box doesn't hire anyone.

Reagan's people (Don Regan, Ed Meese, Weinberger, Shultze out front; Friedman, Simon, et al [Greenspan late in the game] behind the scenes) engineered the "new economy" concept that GHW Bush described accurately as "voodoo economics". Essentially Reagan began de-industrializing the US and converting the US economy to an asset-based economy fueled by credit and supporting financial services rather than manufactured goods and supporting blue collar services.

Inevitable long terms results were obvious almost immediately - extending the 1981 recession and later with the stock market crash and destruction of S&Ls, but Baker or maybe Regan engineered the firing of Volcker in favor of Greenspan who immediately began what is today described as QE; Greenspan bailed out Wall Street buying securities [first ever WS bailout] and in daylight Reagan saved zillionaire investors from their own thievery in S&Ls. In short, Reagan tripled the national debt to the applause of every halfwit in America.

Sound familiar, does it?

The most hilarious part of the whole asset-based economy era is Clinton fooling millions of halfwit human potential enthuisiasts into believing he was something other than a dyed in the wool "new economy" ReagaNUT. Clinton opened the borders following Reagan's pardon, signed NAFTA to deliver another killing blow to the US blue collar middle class (his wife said "fuck them" about blue collar America at a Camp David soiree), then signed repeal of Glass Steagall and de regulation of low margin/no margin speculation in essential commodities. In the bonus round Clinton pioneered no-bid T&M contracts to Halliburton and mercenary military forces with no bid contract to Blackwater. The son of a bitch should have been impeached for any of those items; the only decent thing the man ever did was destroy the feminest notion that powerful men don't have the natural right to fuck the willing and able help.

In one sentence: asset based economies are built on credit and subsidies to the supply end of the market.

After the credit-fueled fantasy economy crashed Obama continued Reagan/Clinton concepts - functionally supply side policy by giving trillions to state and local governments instead of cutting taxes on wage earners in the bottom 50% (people who don't save) - and thereby failed to generate any buzz where real people live. Which is the public sector version of Reagan's failed supply side nonsense in 1981, which extended the recession about a year longer. ALL that bailed Reagan out is the US industrial base was still strong.

The crash of 2008 was inevitable. No asset based economy ever existed before late 1980s - present US economy, and it is through. Unless industry comes back, the US is headed where England spent the 1930s.

 

[EdwardBaiamonte]

The crash of 2008 was inevitable.

and would more capitalism or more socialism have prevented it??? Do you lack the IQ to say????

 

[oldernwiser]

the most expensive component of any manufacturing process - direct human labor - is replaced by non-humans, the prices to the consumer are not similarly reduced.

of course that is stupid and liberal. Under capitalism if a company does not pass the savings on to consumers another competitor will and the first company will be driven out of business. America has the most capitalism and so the richest consumers because of this process.

Welcome to your very first lesson in Economics 101!!

See why we are positive a liberal will be slow?

Ed... I didn't submit to Econ 101. But that doesn't mean that I'm immune from direct observation. Passing savings on to the consumer used to be the way this gets taught, but the reality is that at some point, "competitors" begin to become allies. That has the direct result of keeping prices exactly where they are - especially when one competitor is at a technological disadvantage to another... there is no incentive for the more advanced manufacturer to lower prices all that much if less advanced still have to charge more for their goods.

You might be really smart when it comes to Economy 101, but maybe you ought to consider a course in Intro to Greed.

 

[oldernwiser]

With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as federal budget cuts take hold.

That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers.

“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”

The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

These factors, along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week.

While buoyant earnings are rewarded by investors and make American companies more competitive globally, they have not translated into additional jobs at home.

http://www.nytimes.com/2013/03/04/b...?nl=todaysheadlines&emc=edit_th_20130304&_r=0

This intrigues me for some reason. BofA paid no US taxes in 2011 because they were able to shelter all their funds off-shore - just as a great deal of our multinational corporations have been able to do (some actually able to post a loss here in the US and get a huge return). This same corporation now says that we need a recovery in the labor market to achieve an economic turnaround. If real funds are flowing out of the country faster than they can be printed, where does the money come from to hire a labor force?

We used to trade labor for goods and services, and the production of those goods and services induced investment in the companies producing them. It seems to me that since corporations can sit on their funds now until some politician declares another 1 year 5% tax holiday, they can hold their own stock prices as high as they like by buying up blocks (which they write off as a loss).

Corporate tax rates are at 35%, but I can't seem to find many who actually pay that much. Many companies (like Google and Facebook for instance) hide their funds in Ireland which had a 12% tax rate. These companies are moving their headquarters to Poland now that Ireland realized that a PO box doesn't hire anyone.

Reagan's people (Don Regan, Ed Meese, Weinberger, Shultze out front; Friedman, Simon, et al [Greenspan late in the game] behind the scenes) engineered the "new economy" concept that GHW Bush described accurately as "voodoo economics". Essentially Reagan began de-industrializing the US and converting the US economy to an asset-based economy fueled by credit and supporting financial services rather than manufactured goods and supporting blue collar services.

Inevitable long terms results were obvious almost immediately - extending the 1981 recession and later with the stock market crash and destruction of S&Ls, but Baker or maybe Regan engineered the firing of Volcker in favor of Greenspan who immediately began what is today described as QE; Greenspan bailed out Wall Street buying securities [first ever WS bailout] and in daylight Reagan saved zillionaire investors from their own thievery in S&Ls. In short, Reagan tripled the national debt to the applause of every halfwit in America.

Sound familiar, does it?

The most hilarious part of the whole asset-based economy era is Clinton fooling millions of halfwit human potential enthuisiasts into believing he was something other than a dyed in the wool "new economy" ReagaNUT. Clinton opened the borders following Reagan's pardon, signed NAFTA to deliver another killing blow to the US blue collar middle class (his wife said "fuck them" about blue collar America at a Camp David soiree), then signed repeal of Glass Steagall and de regulation of low margin/no margin speculation in essential commodities. In the bonus round Clinton pioneered no-bid T&M contracts to Halliburton and mercenary military forces with no bid contract to Blackwater. The son of a bitch should have been impeached for any of those items; the only decent thing the man ever did was destroy the feminest notion that powerful men don't have the natural right to fuck the willing and able help.

In one sentence: asset based economies are built on credit and subsidies to the supply end of the market.

After the credit-fueled fantasy economy crashed Obama continued Reagan/Clinton concepts - functionally supply side policy by giving trillions to state and local governments instead of cutting taxes on wage earners in the bottom 50% (people who don't save) - and thereby failed to generate any buzz where real people live. Which is the public sector version of Reagan's failed supply side nonsense in 1981, which extended the recession about a year longer. ALL that bailed Reagan out is the US industrial base was still strong.

The crash of 2008 was inevitable. No asset based economy ever existed before late 1980s - present US economy, and it is through. Unless industry comes back, the US is headed where England spent the 1930s.

I used to think that the president had to be a very smart person to come up with all the ways to "help" the country. Then I started paying attention to the flunkies. Greenspan's goon squad, after he admitted to congress that his economic model was flawed in the post-crash investigations, ended up as presidential economic advisors (after a "change of heart").

Given that, is it really that much of a surprise that Obama's agenda is a modified Bush agenda, is a modified Clinton agenda.... ?

I really have to laugh at the labels that are so readily bandied about - Liberal and Conservative don't mean the same thing today as they did in 1970, yet a lot of folks use the terms exactly as they were used back then. The truth is, Obama was only just a tad to the left of Romney - both squarely dead center in the conservative authoritarian graph. We voted for one of 2 Republicans in essence.

 

[EdwardBaiamonte]

Passing savings on to the consumer used to be the way this gets taught, but the reality is that at some point, "competitors" begin to become allies. That has the direct result of keeping prices exactly where they are.

sorry you are an perfect liberal illiterate. If allies, then they might as well raise prices!! In fact a second or third or forth competitior will see the opportunity in high prices , enter the market with lower prices , and drive the others into bankruptcy.

Even MicroSoft which has a near monopoly keeps its prices dirt cheap to increase volume and discouorage new competition.

At least you admit to being an illliterate!! I'll give you that

 

[EdwardBaiamonte]

The truth is, Obama was only just a tad to the left of Romney -.

your near perfect illiteracy is astounding.

Obama had two communist parents and voted to the left of Bernie Sanders as a senator. He governs center left, not communist, because thats as close to communism as he can get given that flip flopping independents decide the next election.

Is that really over your head??

Its so lazy and stupid to pretend that the president is the government, isn't it????????????????????????

 

[TruthOut10]

Recovery? What recovery?

The economy is growing only a tad over 1%. The stock market is Not The Economy.

Let's be real for at least 1 damn second, you can't deny that the economy isn't recovering.
And you don't really know what you're talking about when you say the stock market isn't the economy.

It's disconnected as far as job growth and the market booming, but it does reflect the economy. The economy the super rich wanted, reflecting their wealth growing and the middle class further demise.

So if you really don't understand, then try to understand and refrain from making stupid comments. Conservation is for grown folks.

 

[EdwardBaiamonte]

,

you can't deny that the economy isn't recovering.

too stupid and 100% liberal. A recovery is usually 4-7% for growth for 2 years to get back to normal. The 2 years is long since past. We never recovered to anywhere near normal and may tip back into recession at any time. It is 100% wrong to call this a recovery.

,
And you don't really know what you're talking about when you say the stock market isn't the economy.

In fact, it just part of the relevant economy. A good stock market, can reflect speculation, an asset bubble, foreign earnings, etc. So, it can be booming while large parts of the economy are dying or stagnating.