This blog post originally appeared on RealMoney Silver on March 7 at 7:57 a.m. EST.
"Now, by two-headed Janus, nature hath framed strange fellows in her time." -- William Shakespeare, The Merchant of Venice (Act I, Scene I) In Roman mythology, Janus is the god of beginnings and endings. He is depicted as having two heads, facing opposite directions. So it is with the two-headed U.S. economy. While corporations are flush with cash, are running a near-six-decade peak in operating margins and are within two quarters of eclipsing the previous peak in corporate profits, the economic crisis of 2007-2009 still haunts the average American. Nevertheless, the schism between the haves (large corporations) and the have-nots (the middle class) -- what I have described as the screwflation of the middle class -- continues to widen and, in the fullness of time, could jeopardize the economic expansion. According to the Bureau of Labor Statistics, 16% of the labor force, or over 25 million Americans, are out of work (14 million unemployed and 11 million underemployed). Mega trends of globalization, technological advances and the growing presence of temporary hirings as a permanent feature of the workplace form the basis of a secular rise in structural unemployment. Further depressing job creation is the fact that there are few growth engines to replace residential real estate, a sector that was such a prominent contributor to GDP and labor in the last cycle. As I recently mentioned in Alan Abelson's Barron's column every month brings more people, who want jobs, leaving the workforce. The plight of the middle class, both in a relative and absolute sense, seems to have deteriorated further as Friday's jobs report disclosed that the average workweek declined by 0.1 hours and there was no change in average hourly earnings. The employment participation, back down to 27 year lows, casts a long shadow on the domestic economy, which, despite normal population growth, currently employs only the same number of people as in 2003. Meanwhile, the cost of necessities (most notably of an energy kind) continues an uninterrupted rise, serving to obviously pressure not only the unemployed but the average Joe that has a job. Most bulls object to this negative analysis, citing a likely pickup in hiring that will be the natural consequence of an expanding domestic economy, rising profits and buoyed confidence in the future. They fully recognize the ultimate cost of policy and absence of budget constraint but view the due bills (of higher inflation and interest rates) as too far in the future to be concerned with, particularly given the confidence held regarding 2011 profit growth. 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