Still Far From Full Employment

When I look at the numbers that Daniel Gross is looking at, I find it impossible to understand why so many people think that we are close to full employment:

Invest Globally, Stagnate Locally - New York Times: By DANIEL GROSS: IN the United States and Europe, there has been a curious disconnect in recent years between the performance of the corporate sector and the performance of the overall economy. For example, median incomes for American workers have barely budged since 2000, while corporate profits have nearly doubled.... It's a truism in the large developed economies that capital is strong and labor is weak. From 2001 to the fourth quarter of 2005, corporate profits as a percentage of United States G.D.P. rose significantly, to 11.6 percent from about 7 percent. Companies have been able to keep a larger share of the cash they generate, rather than pay it out in wages, in part "because the labor market recovery has been weak," said J. Bradford DeLong, professor of economics at the University of California, Berkeley. Professor DeLong notes that while unemployment is low, other measures of labor-market health, from hours worked to the employment-to-population ratio, show it to be less than robust....

The heightened mobility of capital allows companies to invest their profits around the globe with considerable freedom. "American companies really haven't been sinking much of their gains back into domestic investment," said Jared Bernstein, senior economist at the Economic Policy Institute in Washington. In the United States, nonresidential fixed investment as a percentage of G.D.P. fell to 11.56 percent in 2005 from 12.55 percent in 2000....

Comments

[save_the_rustbelt]

Come to the rustbelt, and I will show you less than robust.

And not just in autos.

[Tim Worstall]

Now then, who was it who said, about a year ago, that corporate profits and thus earnings from investments in the stock market were inevitably tied to GDP growth within the US and that this was tied to the demography of the US population? Wasn’t that used as a stick to beat those looking for a part privatisation of social security?
Wasn’t there a paper on this? Paul Krugman, a prminent economics blogger who is also a Professor at Berkeley, and, um, someone from the EPI? Didn’t that paper say that growth in corporate profits, faster than US GDP generally, was a mathematical impossibility? And when challenged, didn’t the same three (or at least the one who responded to my email) say that overseas investment by US companies would never be large enough to make much difference?

My, what a difference a year makes.

[Droves]

So, us unemployed/underemployed folks are starting our own companies in droves. We will soon put huge pressure on the established companies who have not lowered prices.

[Arun Khanna]

"It's a truism in the large developed economies that capital is strong and labor is weak."
Is it?

[anne]

"It's a truism in the large developed economies that capital is strong and labor is weak."

Phooey; pay attention if we only have the humility to do so to Sweden or Finland or Germany or even, dear me, to France. Contrary to the continual analytical crying over how sad that Europe, especially France, is not like us, Europe is in the midst of a sustained bull market for stocks and real estate that makes her appear awfully competitive. Structural protection for labor may be too much in France, and more desirable in Finland, but European labor is surely not weak and I do wish we could understand.

[anne]

Imagine after French students showed convincingly just how strong workers in France are, we choose to believe that they are as weak as or weaker than American workers. Try bringing about worker representation in decision making at Wal-Mart, and try avoinding the representation in Europe.

[Ichi]

This quote is all you need to take away from that article:

"American companies really haven't been sinking much of their gains back into domestic investment,"

[anne]

Often it is argued that improving labor bargaining power, as in France, will simply lead to more unemployment. But, labor bargaining is as tough in Finland and there is little unemployment. Here labor bargaining, beyond "stars," is little, and on the surface unemployment seems low, but this is questionable. The striking fall in the labor force participation rate since 2000, tells us that American labor lacks in bargaining power and employment; then too, we have nowhere near the social safety net of any other developed country.

[me]

ichi mailed it.

All they do is invest in India or stock buybacks. They just don't get it. Want proof?

"ARMONK, N.Y. - When Sam Palmisano addresses IBM's annual shareholder meeting this month, Big Blue's chief will unfurl plenty of good news. And yet investors in the audience could be forgiven for being impatient with the boss.

After all, while Palmisano's four-year reign has dramatically reshaped the technology company, by one key measure it has been unsuccessful. Since he became CEO on March 1, 2002, IBM's shares have dropped 20 percent, shaving about $50 billion from its market value."

http://finance.groups.yahoo.com/group/ibmpension/message/62665

For that he made $20 million.

Want more? How about Nardelli at Home Depot. $28 million and his stock is flat during his tenure while Lowe's is up 200% in the same time period. They even reimburse this guy's income taxes.

[anne]

"American companies really haven't been sinking much of their gains back into domestic investment..."

There is a puzzle here though that I have often thought about but do not understand. We must think more fully about this :)

[anne]

http://www.calvorn.com/gallery/photo.php?photo=6356&u=99|1|...

Brown Creeper
New York City--Central Park, The Ravine.

Look for birds, carefully :)