Nearly four years into the tepid economic recovery, Main Street is finally starting to see some of the rebound that mostly has only blessed Wall Street since the stock market was cut in half and taxpayers bailed out the financial kingpins.
At his family-owned hardware store in a working-class Minneapolis neighborhood, Mark Welna said sales are up 5 percent over last year and he’s expecting one of his best years. Between his store, founded in 1954, and brother Jim’s Welna Hardware, about 2 miles away, employment is at a best-ever 25 full-and-part-time workers.
About a half-hour north in Anoka County, Aggressive Hydraulics is heading toward completion of a $5 million plant this spring that will replace three small antiquated facilities. With credit for small businesses still tight, it took President Paul Johnson and his partners two years, 20 percent down and several different lenders, including the city of East Bethel, to expand his 50-employee facility.
The maker of hydraulic pistons for heavy equipment is competing successfully against Asian manufacturers even as it pays Minnesotans $20 an hour-plus-benefits.
“The orders on our books for 2013 are higher than we’ve ever seen,” said Johnson, who expects to add another five workers in the new plant.
At Butter Bakery & Cafe, on Nicollet Avenue and 37th Street, owner Dan Swenson-Klatt is growing more confident. He employs 22 people at his new ground-floor restaurant, which sits on a resurrected corner long occupied by a shuttered mortuary. Swenson-Klatt is betting he’ll do 20 percent more business this year than he did last year at his smaller location a few blocks away.
“Another week and another batch of positive economic news on the U.S. economy,” Scott Anderson, chief economist of Bank of the West, wrote customers on Friday. “Retail sales, initial jobless claims and business inventories all exceeded economists’ modest expectations. U.S. [economic] growth is now on track to rise at a much improved 2.7 percent annualized pace in the first quarter as consumer spending and inventory building add a bit more to economic growth than previously expected.”
Earlier this month, economist Jim Paulsen, chief investment strategist at Wells Capital Management, sounded a bit vindicated. Criticized for four years by the economic bears for his measured optimism, Paulsen took on those who have said the 120 percent return of the stock market since March 2009 was due solely to the easy-money policy of Ben Bernanke’s Federal Reserve.
Paulsen was among those who said it could take six or more years to completely recover from the worst recession since the Great Depression. He also disputed the sky-is-falling Cassandras every time the economic paused during the recovery.
“Stock prices are not nearing all-time highs simply because of continuous liquidity injections from the Fed,” Paulsen said. “They are because of a solid revival in corporate profits because of fundamental improvements in the U.S. job market and because of improved and broadening momentum exhibited by the U.S. economic recovery.
“We spend so much time watching our public leaders in Congress, but it’s the millions of people who get up and go to work and who are making decisions to invest and buy. … Housing prices are coming back, auto sales are back to 15.5 million, joblessness is going down … lending is coming back. I think the economy will grow 3 percent this year.”
Beneficiaries of productivity
Indeed, thanks to technology, increased efficiency and worker productivity, the Standard & Poor’s 500 index of America’s largest companies is heading for a fourth consecutive year of record profits with fewer workers than five years ago. Corporate profits have risen 170 percent since 2008, according to Bloomberg.
“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 New York Times earlier this month. “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.”
Dean Maki, chief U.S. economist at Barclays, told the Times that corporate earnings, which have grown annually by 20 percent since 2008, now snare 14.2 percent of national income. That’s the highest share of national income since 1950. Meanwhile, the portion going to employees is 61.7 percent, about the lowest point since 1966.
3 million jobs to go
Paulsen has contended big companies, which have benefited from productivity and little competition for labor, are going to have to start hiring people and paying existing employees more as the job market starts to tighten and as they need to expand sales. But we still have about 3 million jobs to go to return unemployment to below 5 percent.
The U.S. Labor Department reported this month that the private sector added a strong 246,000 jobs in February, while the federal government cut 4,200 jobs, excluding the shrinking U.S. Postal Service. State and local governments, continuing a years-long trend, cut another 10,000 jobs.
The good news: those who didn’t dump stock funds at the bottom — or who didn’t have to rob the kitty while out of work — are seeing their retirement accounts back to par or better. And small businesses, some run by forced entrepreneurs booted from big companies, finally are getting some expansion capital as banks start to lend and customers start to open their wallets a little wider.
Now, if we can just get some of those big-company CEOs to invest some of their record stockpiles of cash, hire a few people and give the survivors a raise, we may have a strong economy on our hands by the end of the year.
Neal St. Anthony • 612-673-7144