NYTimes: Third-Quarter U.S. Growth at 4.1% Rate in New Estimate. Good News?

Underemployment BLS June 2013
Source: BLS

The economy is improving, and has been for years under President Obama.

It’s just been sluggish, and there are plenty of people out of work still. There are even more who are underemployed (above graphic is from June 2013). According to Forbes, the "official" underemployment rate does not count discouraged workers who have settled for part-time jobs, or have just given up. These people, properly tracked under what’s called the "U-6" rate, showed underemployment at 14.3% in June 2013.

So, what exactly are we to infer from the revised estimate, reported today by the New York Times, that third quarter estimates for the economy showed 4.3% growth? The NYTimes reports:

The United States economy grew at an astonishing 4.1 percent annual rate, the federal government said Friday in its third and final revision of gross domestic product for the third quarter.

The rate was the fastest in almost two years.

The Commerce Department said business spending was stronger than it originally thought, leading to the revision up from 3.6 percent. Economists had expected the final estimate of growth to be unchanged from that 3.6 percent.

According to the Times, the growth rate for quarter two was 2.5%.

So, this is good news, right?

Not so certain, given the underemployment rate and other factors. Those of us in the middle and lower are making less, therefore spending less.

Consider the rise in companies buying back their own shares of stock, to the tune of $211 billion.

Enter Robert Reich from December 17, via Facebook (emphasis added):

A big reason why CEOs are about to rake in big year-end bonuses even though their sales are lousy (after all, America’s vast middle class and poor aren’t earning enough to buy much) is CEOs been using their companies’ cash, plus whatever they can borrow at rock-bottom interest rates engineered by the Fed, to buy back their own shares of stock. This maneuver raises the price of the remaining shares, thereby giving the CEOs – whose pay is tied to share prices – huge rewards. This year, the 30 companies listed on the Dow Jones industrial average authorized $211 billion in buybacks, lifting the Dow (and CEO pay) to record heights.

This $211 billion could have gone instead to American workers in the form of higher wages – which would have come back to companies in the form of higher sales. McDonald’s, for example, spent $6 billion on share repurchases and dividends last year, the equivalent of $14,286 per restaurant worker employed by the company.

It’s a vicious cycle as long as CEO incentives are directed toward raising share prices rather than sales, and as long as the economy is organized around the stock market rather than good jobs.

Since many of our pensions were shifted to the stock market via crapshoot 401Ks, we have learned that the stock market is not a safe environment for our retirement funds to exist. Know anyone who was unable to retire because his or her 401K lost half its value or more — just when that person was planning to exit the work force?

I do. Too many, in fact.

So, yes, a 4.1% growth in the economy is good news. However, as long as the corporations are defining growth based on the stock market as opposed to job growth, most of us in America will have to wait — and work — for a paradigm shift in the outlooks of corporations.

Or, we will have to fight for it, just like we did in the early 20th century.

Let’s begin by organizing the Service Industry.

More on that to come.