The numbers popping up in the media recently draw an interesting, perhaps conflicted picture of the state of business in the U.S. Here's why.
First, there's unemployment. Like many, I expected the unemployment rate to continue its relentless rise past the symbolic 10 percent mark. It didn't. It fell a bit, to 9.4 percent. Dig a little deeper into the government's official release, though, and you'll find that 14,000 people in the fabricated metal products sector lost their jobs. Machinery-makers shed 15,000. And manufacturing overall shed 2 million jobs since this recession began.
Juxtapose this with earnings from Goldman Sachs, which took big bets that, according to financial statements, generated $100 million in revenue a day for 34 days, and caused profits to balloon to $3 billion over three months. Goldman took away business from competitors and now is reaping the benefits, big-time.
With those profits came huge employee payouts—amazingly huge. Much of this money reportedly comes from the derivatives markets that offer protection against bonds and other debt, the same "hidden" market that played a big role in the financial crisis. Goldman said it's setting aside $11.4 billion (that's billion, with a b) for employee compensation.
Juxtapose this with news of President Obama visiting Elkhart, Ind., on Wednesday to tout the $2.4 billion in federal grant money made available to promote the development of battery-powered electric vehicles. He spoke briefly at RV-maker Monaco Coach in front of a crowd of workers, many of them recently hired back after being laid off last year. Monaco is getting $39 million and is reportedly going to spend it to develop electric trucks with a range of 100 miles.
(Interesting side note: The South Bend Tribune reported one Elkhart resident saying, "What's iffy is having the electric vehicles go for 100 miles. They'll have to improve on that, but it's a starting point." The basic research undoubtedly will be valuable—but how valuable is a truck that goes only 100 miles before needing a recharge?)
Considering all this, let"s analyze some numbers.
- Monaco Coach is getting $39 million in grant money. Goldman Sachs made $100 million a day for 34 days during the second quarter.
- The government is providing $2.4 billion in federal grants for the development of battery-powered electric vehicles. Goldman set aside $11.4 billion for employee compensation.
- 2 million manufacturing workers have lost their jobs since the recession began.
I understand that financial markets essentially lubricate the global economic engine. An economy can"t function without them—hence the massive government support. But by these numbers, it would seem that we place enormously more value on the traders who supposedly lubricate the economic engine than those who make real engines, for battery powered trucks or otherwise.
As a middle-class American, I haven't experienced one iota of direct value from Goldman's astronomical business performance, which boils down to making really good bets. However, I may well experience value down the road from today's R&D in battery technology, energy generation, infrastructure upgrades, and all the other sectors manufacturers touch.
It's my hope that we emerge from this downturn with our values seriously realigned.