The American economy has made positive gains in the last six quarters despite the threat of falling over the fiscal cliff and now the impending sequestration – a round of spending cuts and tax hikes that will have an impact on individual American wallets. These gains have become a boon for corporations, but not for the labor market.
Currently, the Dow Jones industrial average is nearing a record high resulting in a period of big profits that many corporations haven’t seen in years. The improved economic climate in the U.S. coupled with emerging economies such as China and India are causing investors to feel more confident in betting on companies that are turning out strong earnings. The additional push put some corporations back in the game as global competitors, but they are not sharing the love with the American workforce.
One would think that with the improved economic indicators like a healthier housing market, growth orders in construction, machinery and other durable goods, that an abundance of jobs would begin to appear, but unemployment remains stubbornly high at 7.9 percent because many employers are seeing that they can turn a profit with the same amount of employees.
With the sequestration picking up its pace, the $85 billion in spending cuts will surely have an affect on American incomes.
For more on how many corporations are gaining profit share and not hiring as a result, head to the New York Times.