Photos courtesy Kogi Restaurant and Harvard Business School
In the great carousel of business, at the end of which will always be several million precious dollars, lines continue to be blurred. Degenerative habits of the chief executive are not only company-specific. In today’s world, engagement with a line of business is ceaseless, the boss’s wife is the name of the company, and cyber bullying is the new sexual harassment.
It is unsurprising that the Dow Jones Industrial Average has recovered some of its losses after plunging 2.5 percent last week. The stock market is a complicated and rough beast. But it still creates jobs and wealth and this is probably the most important element in whatever new sustainable growth is forecasted.
Stock prices have long been regarded as an important gauge of the economy and for good reason. Everything should be valued to some extent, but the stock market and especially the stock market of major companies provide an opportunity to trace its health.
To that end, the U.S. government recently published a new, comprehensive set of figures on corporate earnings and the broader picture of employment opportunities. For the three quarters ended in December 2018, non-financial corporations in the U.S. reported $10.7 trillion in earnings, an 8.5 percent increase over the previous year. Moreover, the latest figures suggest that corporate profit margins rose in the final quarter of last year, at the same time as wages rose, which is both an encouraging and painful development. The American economy remains at a height of prosperity – even if as economists and investors we would still like to see productivity rates rise.
And the U.S. economy has performed this way even during the financial crisis – a sign that productivity may yet come and aid future growth and income distribution.
But to truly experience the boom, the public has to understand some alarming realities: a recent survey found that 10 percent of Americans think that booms have never been experienced before. Just 16 percent think booms have been already recorded.
In their forthcoming book, Boom Bust Boom: The Confidence Game, Hamza Yusuf and Thomas Kristensen trace the effects of decades of narrow-eyed media and a culture of academic optimistic research that ignores the general environment and the fundamentals of a business. This glut of data is almost always of beneficial or even crucial value for investors, but when it is fed into studies that become prevalent in business schools and among journalists, it is then used to create an ever more optimistic picture of what corporations are actually doing.
A decade ago, we were working on a similar project to identify why American public companies are growing in part through cost cutting and less profitable businesses. But only now have we realized that the goalposts of what constitutes good news for the public are constantly changing.
This time, we have noticed that the public wants to know what is happening to the average American worker and what is likely to happen to them. We are no longer just thinking of the workforce: each day we see increasing protests, anti-Trump measures like the women’s march in January, and numerous media outlets reporting about working conditions at factories – all in the interest of American consumers.
Astonishingly, just five years ago, Americans thought that unemployment was the most important problem facing the country. Unemployment in the U.S. rose after the crisis, but over the last decade it has been low, just a fraction of its peak rates. Moreover, national unemployment is closely in line with those of the rest of the developed world. Unemployment rates in the Eurozone and the U.K. are 3.5 percent and 2.9 percent, respectively. The U.S. has managed to regain a 2.9 percent unemployment rate, well below the peak rate during the recession. And it is lower than the rate of automation and computers in the economy.