Earnings UP, Americans are DOWN
Corporate earnings are soaring. Just in the last two days, we learned that IBM, Caterpillar, Coca-Cola, Harley Davidson and Wells Fargo all reported strong second-quarter results. Then of course, there's Apple--the company blew away estimates, doubling profits from a year ago on strong sales of iPhones and iPads.
My friend Mike wrote me the following note this morning:
I'm glad that US companies are doing so well, but besides my 401 (k), how does that help me or the overall economy?Mike raises an excellent point: robust corporate earnings is good for the stock market, which is steadily marching towards its all-time high, last seen in October, 2007, but that doesn't really help average Americans' lives.
That explains why the most recent Reuters/University of Michigan Sentiment Index unexpectedly fell in July to the lowest level in more than two years. The reason is obvious: the jobs situation remains horrible and the housing market is still weak.
That's why according to the Economic Mobility Project, the average American thinks the government's number-one priority should be to help keep and create jobs in America.
So this quarter's results are all well and good, but the reality is that companies are making piles of money with current staffing levels and at current wages. That's why from the second quarter of 2009, when the recovery began to the fourth quarter of 2010, a recent study ("The 'Jobless and Wageless Recovery' From the Great Recession of 2007-2009″) conducted by economists at Northeastern University found that "corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent".
As corporation rake in profits, here are two facts to consider about average Americans:
- The average American has less than $100,000 in savings (54%, according to AARP)
- The average American household debt (including mortgage) is $75,600 in debt (according to the Survey of Consumer Finances)
