"Shares are up because corporate profits are up, and profits are up largely because companies have figured out how to do more with less.He then connects this to our anemic recovery:
Payrolls used to account for almost 70 percent of the typical company's costs. But one of the most striking legacies of the Great Recession has been the decline of full-time employment -- as companies have substituted software or outsourced jobs abroad (courtesy of the Internet, making outsourcing more efficient than ever), or shifted them to contract workers also linked via Internet and software.
That's why most of the gains from the productivity revolution are going to the owners of capital, while typical workers are either unemployed or underemployed, or else getting wages and benefits whose real value continues to drop. The portion of total income going to capital rather than labor is the highest since the 1920s.
Increasingly, the world belongs to those collecting capital gains."
"It's not sustainable economically because it has resulted in chronically inadequate demand for goods and services. That's meant anemic growth punctuated by recessions. Without a larger share of the economic gains, the vast middle class doesn't have the purchasing power to buy the goods and services an ever-more productive economy can generate."The question of course comes down to how to drive AD in an economy where labor is capturing an ever smaller share of output.