It's earnings season on Wall Street. Here are some of the results
from Bloomberg:
Through yesterday, 71 percent of S&P 500 members that reported posted second-quarter earnings beat analysts' estimates, according to data compiled by Bloomberg. That's higher than the 68 percent figure for the first quarter and the 57 percent average since 1992.
Analysts estimate profit growth in the April-to-June period of 14.8 percent, which extends the S&P 500's stretch of 10 percent-plus quarterly increases to three years, according to Thomson Financial. Earnings will climb 14.7 percent this period and 14 percent in the final three months of 2006, based on Thomson data.
``This streak of above-average corporate earnings has been going on for a long time now,'' said Eric Thorne, who helps oversee $2.3 billion at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania. ``The underlying strength is there from the economy and the earnings picture.''
According to the Federal Reserve's Flow of Funds Report, corporate income as a percent of total income has increased from 8.54% in the first quarter of 2001 to 13.88% in the first quarter of 2006. Over the same period, corporations are the only economic sector to actually save money; undistributed corporate profits increased from $192.3 billion in 2001 to $606.3 billion in the first quarter of 2006.
According to the National Bureau of Economic Analysis, this expansion started in November 2001 when according to the Bureau of Labor Statistic the average hourly pay of non-supervisory workers was $14.70. This figure was $16.62 in May of 2006 for an increase of 13.06%. Over the same period, the inflation gage according to the Bureau of Labor Statistics increased from 177.4 to 202.5, or an increase of 14.15%. Therefore, wages for non-supervisory employees have decreased a little over 1% since this expansion began.
However, the unemployment rate dropped below 5% in December 2005, signaling "full employment". Has the decrease in labor supply increased wages? No. In December 2005 the average hourly wage of non-supervisory employees was $16.35. In May that number was $16.62 for an increase of 1.65%. Over the same period, the overall inflation measure increased from 196.8 to 202.5 or an increase of 2.89%. Therefore, since the economy hit "full employment" wages have decreased 1.25%.
So, all of these good profits aren't translating into better pay for employees. Record profits also aren't translating into more hiring. In fact, the compound rate of establishment job growth for this expansion is .71% -- the lowest of any expasnsion since 1960.
So - there's no trickle down happening. Companies are keeping record profits on their books in the form of retained earnings. Companies are using international wage arbitrage to lower US employees pay after inflation.
Sure am glad the fiscally responsible party's policies are in full force.
Update [2006-8-3 9:53:38 by bonddad]:: Maybe low pay explains this:
A Times/Bloomberg poll found discontent with President Bush's leadership on a variety of key fronts, including the war in Iraq, with 60% disapproval, and the economy, with 59% disapproval.
How would you feel if you hadn't had a pay raise in five years, yet were continually told the economy is doing well?