The two-headed demon trend of increasing corporate profits and declining wages has shown little sign of abatement, according to the latest numbers:
The year-over-year change in the so-called core consumer price index, which excludes volatile food and fuel, has outpaced hourly earnings for the last four months. In January, average hourly earnings climbed 1.5 percent from a year earlier, while core inflation was up 2.3 percent.That's one hell of an "even though," Mr. Chase & Co. The news that 88% of growth between mid-2009 and the end of 2010 went to corporations while 1% went to workers was nauseating last July and remains a quease-inducer today. Even Feroli admits the tragedy here, though his chief concern appears to be consumer spending, not Middle Class security:
"A lot of the outperformance of profits has been due to the fact that margins are expanding," said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. "Firms have been able to keep prices intact even though labor costs have been declining."
...the decline in inflation-adjusted wages bodes ill for the sustainability of economic growth as consumers may eventually be forced to cut back, Feroli said. Businesses have also been slow to redeploy their profits into new hiring.The Bloomberg report concludes by noting that 70% of companies have posted "better-than-expected" profits since January 9th.
"So far what you've had is the government has been able to step in and prop up household purchasing power by various cuts in payroll taxes, various increases in social benefits," said Feroli. "That has sort of kept the whole thing going, but you might worry with real wages being hit spending is going to decline."