2013 was a big year for big corporations

Job-seekers wait to visit the State Department booth at a June job fair in Arlington, Va. Unemployment fell from 7.9 pct. to 7 pct. by November, vs. a drop from 5.3 pct. to 4.6 pct. in the stock market's big 1997 year.
Job-seekers wait to visit the State Department booth at a June job fair in Arlington, Va. Unemployment fell from 7.9 pct. to 7 pct. by November, vs. a drop from 5.3 pct. to 4.6 pct. in the stock market's big 1997 year. (ANDREW HARRER / Bloomberg)
Posted: January 02, 2014

For corporate America, 2013 was a banner year.

The Standard & Poor's 500 stock index had its biggest gain since 1997, when the Internet boom was going strong.

One Philadelphia-area company, Lincoln National Corp., a life insurer based in Radnor, was near the top of the heap in 2013. Shares in Lincoln, which markets itself as Lincoln Financial Group, nearly doubled, to finish with the 13th-best gain in the S&P.

But the gains were widespread in the index, largely because corporate profits are at record highs nearly across the board, Mark Zandi, chief economist at Moody's Analytics in West Chester, said Tuesday.

Big U.S. corporations have "never done better," Zandi said. "Their profit margins are double what they have averaged since World War II. For corporate America, big corporate America, these are really very good times."

The widely watched S&P 500 index gained 29.6 percent last year, less than 2 percentage points below the 31 percent tech-powered surge in 1997.

But the stock-market gains, which predominantly benefit those who are already well off, were accompanied in 1997 and 2013 by very different conditions in the economy.

The unemployment rate, for example, fell from 5.3 percent to 4.6 percent in 1997, as the economy added more than three million jobs, a gain of 2.6 percent.

The unemployment rate started 2013 at 7.9 percent and fell to 7 percent by November, with the addition of just under two million jobs for a gain of 1.4 percent. That gain came 41/2 years after the recession officially ended in June 2009.

By another measure - median household income - the U.S. economy is significantly worse off than in the late 1990s.

The latest data, for 2012, estimated median household income - which means half made more and half made less - at $51,017. Adjusted for inflation, that figure was $54,702 in 1997, according to the U.S. Census Bureau.

"That shows that middle America is still struggling; that while corporate America is doing very, very well, it hasn't translated yet into jobs, lower unemployment, higher wages. If history is any guide, that's to come, but that will come over the next several years," Zandi predicted.

A remarkable aspect of the U.S. stock market in 2013 was how widespread the gains were. Standard & Poor's divides the S&P 500 into 10 industry sectors. Five sectors posted gains greater than 33 percent, four had increases in the 20 percent range, and only two were in the single digits.

During the 1990s boom, stock market gains were concentrated in the technology sector. In 1989, information technology companies accounted for just 5.9 percent of the market value of companies in the S&P 500. That figure had climbed to 12.3 percent in 1997 and was 34.5 percent at the peak of the Internet bubble in 2000, according to Standard & Poor's.

But last year, there were no big shifts in the makeup of the index.

That could be a sign that the economy is in better shape than it was in 1997, that it is in the midst of a long recovery.

"It could go on for another five, 10 years. I think we're in a much better place, believe it or not, than we were in 1997," Zandi said.


hbrubaker@phillynews.com

215-854-4651 @InqBrubaker

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