The economic recovery is helping major corporations but not benefiting American workers, a situation that could get worse as the new automatic spending cuts begin to take effect, reports The New York Times.
“So far in this recovery, corporations have captured an unusually high share of the income gains,” Ethan Harris, co-head of global economics at Bank of America Merrill Lynch, told the newspaper. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”
While profits helped to push the Dow Jones Industrial average past 14,000 last week — close to a record high — unemployment has been stuck at just below 8 percent since September.
With millions out of work, there is little pressure on companies to raise salaries; at the same time, gains in productivity allow corporations to increase sales without adding workers, experts say.
Meanwhile, experts estimate that the $85 billion in automatic cuts taking effect between now and Sept. 30 as part of the budget sequestration could cost an additional 700,000 jobs. The cuts are not expected, however, to substantially hit the bottom line in corporate America, or reverse the rally in stocks.
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