Pop the champagne corks! Set off the fireworks! The stock market hit a new high in 2013! The Dow Jones Industrial Average rose by nearly 26.5 percent, its best year since 1998. The S&P 500, meanwhile, did even better, rising nearly 27 percent, its biggest leap since 1997.
At least for the markets, the Great Recession is very much in the rearview mirror. "2013 was a great year," wrote one financial analyst. "The year was far better than most pundits thought possible last January." However, that prosperity didn't exactly trickle down to the rest of America. Unemployment remained stubbornly high, ending the year at 7 percent, while real hourly earnings went basically nowhere, rising a measly 0.9 percent between Nov. 2012 and Nov. 2013.
Despite the middling outlook for the real economy, investors are gearing up for an even bigger 2014. As CNN Money noted, "most experts say stocks can go even higher, assuming the economy continues to improve and corporate profits keep rising." And therein lies a big problem: The corporate successes driving stocks to new heights are, more and more, coming at the expense of labor. As this chart shows, since the onset of the Great Recession (exacerbating a trend that began decades before), corporate profits as a share of the economy have been going up and up, while wages as a share of the economy have been going down, down, down. (Wages are the red line, corporate profits the blue.)
Until the early 1970s, wages equaled about half of gross domestic product, or GDP. But since then, they've slid downwards, with the tech bubble of the late 1990s providing only a brief respite from the decline. Worker wages stopped rising in tandem with productivity, while corporate taxes, which used to make up a significant share of federal revenue, fell off a cliff. (Yes, a rising stock market helps the stock holdings and retirement accounts held by everyone, but currently, only half of Americans have any stock investments at all, with the largest declines in stock holdings occurring in middle-income households.) The successes of corporate America and main street America, as it were, have been decoupled.
So will 2014 be any better for workers? In the good news column, 13 states saw their respective minimum wages go up as of yesterday. In the bad news column, the unionization rate in the U.S. is almost at a 100-year low, giving workers less of an ability to bargain for their fair share of rising productivity and profits.
And if you're unemployed? Not only is there little reason to believe any new policy will come out of Congress to boost job creation, but Republican intransigence caused a cut in unemployment benefits that makes no sense on either an economic or moral level. Muddling through is the order of the day, and as the unemployment rate slowly ticks downward, the Federal Reserve is going to receive increasing pressure to begin winding down its extraordinary efforts to boost growth.
So let's keep the stock market's rocket ride in perspective. At the end of the day, it's mostly meaningless to the workers for whom the Great Recession never really ended.