Came across this new Eye on the Market analysis from J.P. Morgan – bad but not surprising news
Several depressing statements here, but the one that stands out for me is the latest confirmation that most of us are losing ground:
“[P]rofit margins have reached levels not seen in decades. The challenge, which we have discussed many times
before: what is driving these margins2? One useful way to deconstruct profits is to measure them from peak to peak, and
analyze what changed. As shown in the first chart, S&P 500 profit margins increased by ~1.3% from 2000 to 2007. There are a
lot of moving parts in the margin equation, but as shown in the second chart, reductions in wages and benefits explain the
majority of the net improvement in margins. This trend has continued; as we have shown several times over the last two
years, US labor compensation is now at a 50-year low relative to both company sales and US GDP.”
Okay, so I’ll spare everyone another rant about greedy b*s*t*r*ds raking it in while the rest of us struggle and note that, this, according to the Morganites, is the main reason profits are so high. Not because corporations are fundamentally healthier, making investments, expanding, all the things that point to a recovery. No, they’re simply taking out of workers’ hides (okay, a little rant). I’ve already written more than once about the the corporate cash hoarding–at the end of Q2 last year, non-financial companies in the Standard and Poor’s 500 were holding $1 trillion in cash or like assets, and that was projected to double by the end of 2010.
Okay, so companies claim they can’t invest that, because conditions are too uncertain. I’ll spare you a rant on that point, as well. But why, when CEO compensation is soaring, couldn’t a chunk of all that wealth that had been created by the efforts of the rank-and-file been given back to them?