About Me 0046: Making Money Working

What will happen to the US economy in 2011? If you're referring to profits of big corporations and Wall Street, next year is likely to be a good one. But if you're referring to average American workers, far from good.

The two American economies -- the Big Money economy and the Average Working Family economy -- will continue to diverge. Corporate profits will continue to rise, as will the stock market. But typical wages will go nowhere, joblessness will remain high, the ranks of the long-term unemployed will continue to rise, the housing recovery will remain stalled, and consumer confidence will sag.

The big disconnect between corporate profits and jobs is likely to continue because America's big businesses are depending less and less on U.S. sales and U.S. workers. Their big profits are coming from two sources: (1) growing sales in China, India, and other fast-growing countries, and (2) slimmed-down US payrolls.

In a typical recovery, profits lead to more hiring. That's because in a typical recovery, American consumers head back to the malls -- and their buying justifies more hires. Not this time. All the hype about Christmas sales over the last few weeks masked the fact that American consumers demanded bargain-basement prices. And the price-cutting dramatically reduced sellers' margins. In short, profits aren't coming from American consumers -- and profits won't be coming from American consumers in 2011.

Most Americans don't have the dough. They're still deep in debt, can't borrow against their homes, and have to start saving for retirement.

The Dow Jones Industrial Average is rising because of foreign sales. General Motors is now making more cars in China than in the US, and two-thirds of its total sales are coming from abroad. When it went public last month it boasted that soon almost half its cars will be made around the world where labor is less than $15 an hour.

Walmart isn't doing especially well in America but Walmart International is booming. And Walmart is hiring like mad outside the US.

General Electric is keeping its payrolls down in the US but plans to invest half a billion dollars in Brazil and hire 1,000 Brazilians, and invest $2 billion in China.

Corporate America is in a V-shaped recovery. That's great news for investors and everyone whose savings are mainly in stocks and bonds. It's also great news for executives and Wall Street traders, whose pay is linked to stock prices. All can expect a banner 2011.

But most American workers are trapped in an L-shaped recovery. That's bad news for the Main Streets and small businesses in 2011. It's also a bad omen for home prices and sales, and everyone whose savings are mainly in their homes.

Home prices in major metropolitan areas sank last month, the third straight month-to-month drop. I expect home price declines to continue next year. We're in a double-dip housing market, largely because unemployment remains so bad that millions of Americans can't pay their mortgages.

None of this bodes well for US employment next year. I expect the official unemployment rate to remain around 9 percent.

In other words, whether 2011 is a great year economically depends which economy you're in - the one that's rising with the profits of big business and Wall Street, or the one that will continue to struggle with few jobs and lousy wages.

Sadly, the next Congress is unlikely to do much to reverse any of this. Most Republicans and too many Democrats are dependent on corporate America and Wall Street. Their version of tax reform is to cut taxes on the wealthy and on big corporations, and either raise them on everyone else (sale and property taxes are already on the rise) or cut spending on programs working families depend on.

At some point, perhaps, the disconnect between America's two economies will become so big and so obvious it can no longer be ignored. Progressives, enlightened Tea Partiers, Independents, organized labor, minorities, and the young form a new progressive movement designed to reconnect America.

One can always hope.

Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.

Microsoft plans to introduce a special version of Windows for low-power mobile devices like tablets at next month’s Consumer Electronics Show, according to multiple reports.

The Wall Street Journal and Bloomberg claim to have both heard that Microsoft will discuss a version of Windows that supports mobile ARM chips and other low-power processors. The Journal adds that the new Windows OS isn’t expected to be available for two years.

My instant reaction to these reports: WTF?

Microsoft already has a new version of Windows designed for mobile devices: Windows Phone 7. The company hired new executives, spent million of dollars on development facilities, rethought its entire mobile strategy and took an entire year to whip up a touch-friendly mobile OS from scratch.

In terms of power and features, Windows Phone 7 hasn’t caught up with Android or iOS yet, but it’s a solid start. It’s certainly more fit for tabletization than the desktop Windows. There are many reasons why a Windows 7– based tablet makes no sense.

Windows Phone 7 is also light-years ahead of Microsoft’s previous mobile OS, Windows Mobile, to say nothing of Windows CE, Microsoft’s first mobile OS, which lives on as an “embedded” OS powering hospital devices, manufacturing equipment, point-of-sale devices, and the like.

So why in the world would Microsoft throw more money and talent at a new mobile version of Windows when it’s already made great progress on a newer, better one?

I like the well-informed Mary Jo Foley’s skeptical interpretation of the news. She thinks that Microsoft will announce a new version of Windows Embedded Compact, a trimmed-down version of Windows CE made especially for enterprise devices. That OS, which is currently in beta, already runs on ARM, and might make a suitable platform for Windows-powered tablets, especially the kind attached to your UPS driver’s barcode scanner.

Among other points, Foley notes that the timing is right, and that Microsoft announced tablet partners earlier this year who are already in the business of making Windows Embedded Compact devices.

That outcome would make a lot more sense to me, and if Foley’s right, Microsoft’s “tablet” news won’t be as exciting for the average gadget geek aching for a Microsoft-powered iPad competitor (unless you have a urinary tract disorder).

See Also:

7 Reasons You Won't Want a Windows 7 Slate

It's Not Easy to Make a Tablet, Stantum Slate PC Proves

Microsoft Touts Home Entertainment at CES Keynote

HP's Windows 7 Slate Strikes at the iPad

Official: HP Slate Will Run WebOS

Photo: Microsoft CEO Steve Ballmer talks up the goods at CES 2010.

Jon Snyder/Wired.com

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Thursday, January 6, 2011

Making Money Working

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