Primarily the ability of firms to achieve record profits through automation, information technology, easy access to cheap foreign labor markets. In 1981 those things were there, but in their infancy. 30 years later those structural forces were in full effect (and getting stronger every day.)
Firms today are at record high profit levels with the employment they have. Name me a time in American history when S&P 500 firms have been more profitable?
Firms today can borrow money at interest rates (thank you FED) not imaginable in 1981. And they do so to buy equipment and automation.
Originally Posted by Submodo
I would take issue with your claim that in 1981 those things were just "in their infancy". Where I come from, the steel industry employed 150k people in 1980 but lost 2/3 of those jobs while Reagan was in office. Steel makers were forced to invest in modern labor-saving technology to survive. Here is what it looks like today:
"Inside the Edgar Thomson mill on a recent workday, workers are surprisingly scarce. That's a reflection of the leap in productivity that the industry has enjoyed since the dark days of the early 1980s. At that time, producing a ton of steel required about 10 man-hours. Today, it takes a little more than an hour.
The advance cuts two ways. It's great news for profits, not so good news if you're an unnecessary laborer. But a generous profit-sharing plan has taken some of the sting out of the labor-saving automation. Last year, the average USW member at the Edgar Thomson mill got about $10,000 from the plan."
We wouldn't have a steel industry today if it still took 10 man-hours to roll out a ton. And don't forget there are a lot of new jobs created at equipment suppliers. My point is that Reagan's economy was buffeted by many of the same forces you identified. Reagan even encouraged such investment with special credits and accelerated depreciation. Yet his policies were successful in stimulating a strong recovery, despite the fact that borrowing rates (as you noted) were far higher back in 1981.
Profits are healthy now, but they weren't back in 2009 when the current economic recovery began. By focusing on raising taxes and discouraging hiring (through the ACA and other anti-growth policies), Obama has made the recovery a feeble one. The only way businesses have been able to rebuild profitability is by keeping labor costs in check. They would much rather hire more workers, but that would require a government that puts tailwinds behind the economy instead of headwinds in front of it.
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