Hourly Earnings

While the economy didn’t start adding jobs until 2010, average hourly earnings for non-supervisory positions fell in only four months between 2007 and 2015. Still, that didn’t keep overall employee compensation from sliding to 52 percent of U.S. gross domestic product in 2013, the lowest level in Commerce Department statistics going back to 1948.

Using a 10-year rolling average of stock returns and pay, the gap between the two was higher than it is today during the 1990s technology rally and its immediate aftermath -- a time when equity ownership among U.S. families peaked at 67 percent, according to a Gallup poll published last year. The same survey put ownership now at 54 percent.

“During this cycle, shareholders have benefited considerably more than employees,” said David Kahn, managing director at Convergent Wealth Advisors in Los Angeles. The firm oversees about $8.4 billion. “Margins are near peak levels and we are starting to see some wage gains. Stock prices and nominal wage gains are likely to track much more closely.”

Corporate Margins

At the intersection of economic growth, sales, earnings and productivity are margins, the profitability indicator that American CEOs last year fattened to record levels. If stagnating GDP mutes revenue growth, it’s possible to sustain earnings by cutting costs -- from capital to commodities to labor.

That’s what U.S. companies did. Operating margins, or income divided by sales, more than doubled among S&P 500 companies to a record 10.1 percent in the third quarter of 2014 from 4.6 percent at the start of 2009, data compiled by S&P Dow Jones Indices show.

Along the way, the productivity of U.S. workers, or employee output per hour, rose at an average 1.5 percent a year. And equities, aided by around $2 trillion in share buybacks, went on the biggest bull run since the Internet bubble.

“The S&P has benefited from the lean and mean mentality,” said Bernard Schoenfeld, the New York-based senior investment strategist at BNY Mellon Wealth Management, which oversees $190 billion. “When we look at the health of the economy, yes, there is a portion that could benefit from higher wages. But fortunately we don’t have such tremendous wage growth as we did in the 1970s, when productivity was slowing.”

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