Economics Report: Good Friday

I just read an  interesting article from Bloomberg. The monthly economic numbers are out and things are still looking good, except for the (now) perennial problem of the federal debt.

It had some (slightly) startling information which could be very important for policy-makers.


We know a faster growing economy during the Obama years led to corporate growth and profits (at a slow rate) with NO significant increased middle-class worker compensation until the unemployment rate decreased to about 4%. Now unemployment is finally down to the 3% range and worker compensation is increasing some. That's one good factor.

Large corporations have been saving and buying back their own stock, so executives can benefit from higher stock prices. They haven't been paying employees more or hiring a lot more. Before today I haven't seen any reports about small corporations or proprietorships which hire and sell only domestically.


Now, according to the news, the GDP growth rate is up a bit and Americans are saving MORE, but it is only among proprietors. Those are good second and third factors.

Workers still aren't particularly sharing in the GDP or profits growth. Still, this makes me wonder if there will be some point at which proprietors or small corporations would have sufficient savings (or padding if you like) to begin paying employees more. That remains to be seen.

However, if this were to happen, then a sustained growth rate of some percentage, along with a low unemployment rate, and good savings rate, might lead to a better 'trickle down' effect. If that can be established it would be better than more aggressive government measures to enforce higher pay for the middle-class. The poor working class will always require a regularly raised minimum wage as other business factors rarely influence their wages.

The next positive factor could be a better government program for infrastructure spending. While the usual kinds of spending are always going to be necessary, it may also be possible to use the development of North Korea as a model for a greater corporate backed corporate development plan. If that can be done it would put to work much more of the (more or less) idle reserve savings of large corporations or other investors. That would push the economy along at an even faster growth rate.

With all those positive factors aligned, it might lead to a strong virtuous cycle for the economy the first time in many years.