The Labor Department reported a week ago that 236,000 jobs had been created in February. That's good news - but not nearly good enough. Even if this rate were to continue, which seems unlikely, the United States wouldn't be back to pre-recession levels of unemployment for another four years.
American workers remain in a bear market. More than 12 million Americans are still without work. Another 8 million are working part time but would rather be working full time. Many have given up looking. The percentage of working-age Americans holding jobs is the lowest it has been in decades.
Wages, meanwhile, continue to fall behind inflation. The real median wage is about 8 percent below where it was in 2000. Yet investors are experiencing one of the most bullish markets in recent memory. The Dow Jones industrial average has hit a record high. Corporate earnings have doubled since 2000.
Why is the stock market doing so well while most Americans are doing so poorly?
- First, corporations have been investing in new technologies rather than in their workers. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits, but it also means lower wages and fewer jobs. Washington is partly responsible. Corporations get tax credits and deductions for investments in new technology and machines. They don't get tax benefits for improving the skills of their employees.
- Second, high unemployment has all but eliminated the bargaining power of most workers - thereby allowing corporations to keep wages low. This also means higher profits.
- Washington is partly responsible for this, too. Initiatives that might reduce unemployment - such as investments in the nation's crumbling infrastructure or a new Works Projects Administration or Civilian Conservation Corps to hire the long-term unemployed - have been rejected in favor of austerity economics.
- Third, globalization has brought profits to big corporations but not to average Americans. U.S.-based global corporations have been expanding and hiring in Asia and Latin America where markets are growing fastest, even while cutting back on jobs and wages at home.
- Washington has abetted this as well. Tax rules and trade policies have favored outsourcing abroad, and encouraged companies to park their profits outside the United States.
- Finally, the Fed's easy-money policies have pushed investors into the stock market because bond yields are so low. The yield on the 10-year U.S. Treasury note is still around 2 percent. This has also fueled the bull market.
All of this spells widening inequality in America. People who invest the most in the stock market have high incomes. Those who rely most on wages have lower incomes.
Corporate profits are claiming a larger share of national income than at any other time in 60 years, while the portion of total income going to employees is near its lowest since 1966.
As my colleague Emmanuel Saez recently found, all the economic gains between 2009 and 2011 (the last year for which data were available) went to the richest 1 percent of Americans. The bottom 99 percent continued to lose ground.
And yet the tax code continues to give preference to capital gains over ordinary income, a major advantage to investors but not to people who rely on paychecks for their living.
In coming months, the sequestration is likely to make all this worse, since it will slow the U.S. economy and keep unemployment higher than otherwise.
It's also hurting the most vulnerable among us - eliminating low-income rental subsidies and emergency homeless shelters, reducing unemployment benefits, squeezing federal aid for poor schools and cutting nutrition assistance for poor women and infants.
The health of an economy is not measured by the profits of corporations headquartered within it or the value of its stock market. It depends on how many of the people have jobs, whether those jobs pay decent wages, and what happens to those who don't have jobs or whose wages don't lift them out of poverty.
By this measure, America remains a long way from economic health.
The role of government, meanwhile, should be to level the playing field so hardworking people have a fair chance.
Yet not for a century have public policies so blatantly helped the most fortunate among us, so cruelly harmed the least fortunate and exposed so many average working Americans to such widespread insecurity.
Robert B. Reich is Chancellor's Professor of Public Policy.