Dow Up, GDI Up, Yet Unemployment Up, Labor Force Down

Cory over at Madville makes a big deal of the Dow hitting 14,000.

As part of that, he links to a post of mine in which I point out the slide in the Dow immediately after the election (see here).  He rather misunderstands the thrust of that post, but it's easy to see why - it was not the most articulate I've ever posted, in part because I did (and do) expect the stock market to contract in the near term.

My primary point, though, was that the rich were going to react to the changes in the tax and regulatory environment inherent in an Obama election.  The initial reaction was emotional, as it always is, and there was a bit of a sell-off the day after the election.  But as they've had time to process what is actually happening, the rich have continued to shift assets around to protect them from the efforts of Obama to take their profits and assets.  As I said then, the rich didn't get rich by waiting around for the government to take their money.

So, while the Dow goes up - indicating slightly more profitable businesses, unemployment also went up (to 7.9%) and labor force participation went down yet again (by nearly 170,000).  So what gives?

There are flaws in the way GDP is reported (something I point out here), and some think GDI (Gross Domestic Income) the better indicator of economic growth.  Those numbers (GDI), by the way, do indicate some significant growth in income in December (2.6% vice 1% or less the preceding 4 months - see here).  That will, inevitably, translate into greater spending and investing - people aren't going to put it in paper bags and hide it in their mattresses.

But if you read a little into that press release, you'll see that a significant portion of that GDI increase was due to bonuses and other irregular payments - the very ones accelerated to take advantage of 2012's lower tax rates.  The strong suggestion is that what we have here is a bit of a spike as people make some end-of-year adjustments now that they have a clearer picture of the coming tax policies.  I don't expect it to last. 

(Note, by the way, that this contradicts the widely reported "shrinkage" in the economy in the 4th quarter.  The numbers you choose to look at make a big difference.)

But the bottom line from all these numbers and reports is that those who have money are finding ways to keep it.  Those who don't have money are finding it very difficult, however, to get some.  The rich, in other words, are getting richer and the poor poorer - the kind of thing that's supposed to happen when Republicans are in charge but which more often happens when Democrats are.  Democrat policies tend to lock people into their existing socio-economic stations, making movement among them difficult.  This is why they are the party of the very rich and the very poor (most of the richest members of Congress are Democrats, not Republicans, and "crony capitalism" is a mainstay of both Clinton and Obama economic policies). 

The Republicans aren't the party of the rich.  They're the party of those who want to get rich.