Aug 23, 2011
The winner economy and the loser economy
Just what do America’s large multinational corporations have to do with the US economy? Very little, judging by the data.
Item: Final sales of domestic product rose by 3.8% (without adjustment for inflation) from the second quarter of 2010 to the second quarter of 2011. Sales of S&P 500 corporations rose by 10%.
Item: Employment in the S&P 500 corporations rose by 10.6% between 2009 and 2010, to a total of 18.666 million. Total employment in the United States rose by 0.7% over the same period, to 130.26 million. Employees of the S&P 500, that is, comprise less than 8% of total US employment, and their employment pattern bears no resemblance to the aggregate.
Item: Profits of S&P 500 corporations rose by 19% between the second quarter of 2010 and the second quarter of 2011. Nominal GDP (gross domestic product) of the US rose by 3.7%.
Item: 47% of S&P 500 sales are overseas.
Item: Americans with no college-level education have an unemployment rate of 9.9% and (which is much more revealing) a labor-force participation rate of just 61%. Americans with some college education have an unemployment rate of 8.6% and a participation rate of 70%. And Americans with a bachelor’s degree or more have an unemployment rate of 5%, but a participation rate of 76%. Huge numbers of less-educated Americans, that is, don’t ”participate” in the labor force because there is nothing for them to do. But Americans with a college degree (as devalued as those degrees are) have little unemployment and a very high rate of ”participation.”
America, as I observed last week (The people’s Ponzi scheme, Asia Times Online August 15), imported $6 trillion of the world’s savings between 1998 and 2007. That great migration of capital employed an army of construction workers, mortgage bankers, retailers, lawyers and others dragged along by the tide. Real estate tax collections surged along with home prices and local governments grew fat and hired legions of workers.
And the construction boom kept less-educated Americans (and a great many immigrants) occupied. The construction industry has imploded, local governments have laid off 400,000 workers since August 2008, and countless service firms have disappeared. Nothing will bring them back.
Given the magnitude of the bubble that had to be popped, the outcome actually is encouraging. Most Americans with a college degree barely can add and subtract and compose a business letter, and most of them rode the bubble in various capacities. Yet despite the collapse of many white-collar professions, the unemployment rate of college-educated Americans remained around 5%. That testifies to the flexibility of the American economy and the resourcefulness of American job-seekers