Next time you hear an economist or denizen of
There are two American economies. One is on the mend. The other is still coming apart.
The one that's mending is America's Big Money economy. It's comprised of
The Big Money economy is doing well these days. That's partly thanks to
Free money can almost always be put to uses that create more of it. Big corporations are buying back their shares of stock, thereby boosting corporate earnings. They're merging with and acquiring other companies.
And they're going abroad in search of customers.
Thanks to fast-growing
So don't worry about America's Big Money economy. According to a
The Dow Jones Industrial Average is back to where it was before the Lehman bankruptcy filing triggered the financial collapse. And profits at America's largest corporations are heading upward.
But there's another American economy, and it's not on the mend. Call it the Average Worker economy.
Last Friday's jobs report showed 159,000 new private-sector jobs in October. That's better than in previous months. But 125,000 net new jobs are needed just to keep up with the growth of the American labor force. So another way of expressing what happened to jobs in October is to say 24,000 were added over what we need just to stay even.
Yet the American economy has lost 15 million jobs since the start of the Great Recession. And if you add in the growth of the labor force -- including everyone too discouraged to look for a job -- we're down about 22 million.
Or, to put it another way, we're still getting nowhere on jobs.
One out of eight breadwinners is still out of work. Most families in the Average Worker economy rely on two breadwinners. So if one out of eight isn't working, chances are high that family incomes are down compared with what they were three years ago.
And that means the bills aren't getting paid.
According to a recent
Delinquency rates on home loans are rising. Distressed sales are up as a percent of total sales.
Most people in the Average Worker economy own few shares of stock, if any. Their equity is in their homes. But with all the delinquencies and distressed sales, the housing market has a glut of homes for sale. As a result, home prices are still dropping. So the net worth of most Americans is still dropping.
Even though interest rates are falling, most people in the Average Worker economy can't refinance their homes. They can't get home equity loans. Banks don't want to lend to the Average Worker economy because people in it are considered bad credit risks. They still owe lots of money, their family incomes are down, and their net worth has fallen.
And according to the
Inhabitants of the Big Money economy are celebrating Republican wins last week. They figure financial regulations will be rolled back, environmental regulations will be canned, the Bush tax cut will be extended to the top 1 percent, and it will be harder for workers to form unions.
Inhabitants of the Average Worker economy aren't so sure. The economy has been so bad, they're angry at politicians. They showed their anger at the ballot box. They took it out on incumbents.
But if nothing changes in the Average Worker economy, there will be hell to pay.
- The Consequences of Fiscal Irresponsibility
- America's Two Economies: Why One Is Recovering and the Other Isn't
- Michele Bachmann's Plan to Fix the Economy
- Achieve Balanced Federal Budget Through Spending Restraint
- Unemployment Trumps the Budget Deficit
- GDP Now Matters More Than Force: Policy for the Age of Economic Power
- What Population Growth and Decline Means for the Global Economy
- Why the Retirement Age Is Increasing
- Dr. Bernanke's Magic Elixir for the Economy
- How Quantative Easing 2 Could Affect Your Money
- QE2: Potential Winners and Losers
- Globalizing the Energy Revolution
- Obama's First Stand
- The Politics of Budget-Cutting
- America Checks Into Rehab
- Interest Rates Drop Again But Will Housing Market Perk Up?
- G20 Summit: Hitting Singles in Seoul
America's Two Economies: Why One Is Recovering and the Other Isn't
(c) 2010 Robert Reich