Is it possible that 98 percent of us don't participate in the economy?

Further dark musings about whether the stock market is all that matters.

I’ve been giving some more thought to this idea that the real economy is the stock market and what people keep saying is the real economy—jobs, GDP, retail sales—is just sentimental nonsense (see “What If The Stock Market Really Is The Economy?,” Sept. 3).

To put it, once again, in terms established during the religious controversy that rocked the Massachusetts Bay Colony Puritans during the 1630s: I’m considering that the covenant of works (Arminianism), which I update to mean labor, might be irrelevant to the modern economy, and that the covenant of faith (Antinomianism), which I update to mean the stock market, is the one true path. Which would reverse history because the Massachusetts Bay Colony ended up concluding that Antinomianism was heretical and banished its principal adherent, Anne Hutchinson, to Rhode Island (see illustration, above).

Median household income actually rose a pretty impressive 6.8 percent last year, to $68,703, according to a Census report released yesterday (even though median earnings rose a much-less-dramatic 2.1 percent for men and 3 percent for women). Score one for Arminian orthodoxy. But the Covid recession has probably wiped out these gains. And as a new Rand study points out, if wages had kept up with economic growth after the 1970s, median income today would be twice its current level. Two points for the Antinomians.

The S&P 500, which doesn’t even pretend to have much to do with these poor sinners we call workers, is continuing to prosper even as they do not. It’s hard to find an up-to-date statistic about what proportion of the U.S. workforce the S&P 500 employs. That’s because nobody cares, least of all the S&P 500. But five years ago it was about 17 percent, according to Deutsche Bank. Lets be generous and say that today the S&P 500 employs 20 percent of all U.S. workers. That means 80 percent of U.S. workers don’t participate in the economy.

The S&P 500 is dominated, to a degree we haven’t seen in 30 years, by its top five companies. They represent about 23 percent of the whole, and pretty much drive today’s stock market, which is to say the economy. Twenty-three percent of 20 percent is about five percent. So now we’re down to perhaps 5 percent of the U.S. workforce employed by the companies that really matter. Which means, yea verily, that 95 percent of the workforce doesn’t matter.

But wait! I’m assuming that because the top five companies represent 23 percent of the S&P 500, they also employ 23 percent of the people who work for S&P 500 companies. That’s the way it used to work—you couldn’t run a huge company without employing a huge workforce. But today it’s almost the opposite; big workforces cut into a company’s value, because human beings are a costly nuisance. Walmart, the country’s biggest employer, is right now barely making it into the S&P 500’s top 30 companies, and nobody ever accused Walmart of pampering its employees.

The top five companies in the S&P 500 don’t employ anywhere near 23 percent of the people who work for S&P 500 companies. They employ about 633,000 people. That’s smaller than the population of El Paso, Texas. Close your eyes and imagine El Paso being the only place in America whose inhabitants participate in the U.S. economy. 

The economy employs about 259 million people right now. The El Paso-sized workforce that really matters in the U.S. economy therefore represents not 5 percent of the total U.S. workforce, but more like 2 percent. And remember, unemployment is really high now. If it weren’t, it would represent even less. The covenant of works is by now practically a rounding error.

What are these five companies that constitute the U.S. economy? Apple, Amazon, Microsoft, Alphabet (Google), and Facebook. The last two have taken the Antinomian covenant of faith to a level of such divine purity that they don’t even sell products or services. Selling products or services is a thing of the devil! Instead, they collect microscopic detail about the preferences of their customers, or whatever it is you call people who use your product but don’t pay you, and peddle that to other companies that sell products and services to consumers. 

Consumers belong neither to the covenant of works nor to the covenant of faith. They belong to yet a third covenant unheard of in the 17th century Antinomian controversy, a covenant of stuff. Consumers buy stuff. Even now. Retail sales are still going up, even though what we thought was the economy is still in the toilet. How does this happen? It is the Lord’s will that consumers go into hock. Consumer credit clocked in in July at $4.14 billion. You probably think of that as debt, but actually, that debt gets securitized, so it isn’t debt at all. It’s an investment (though not yours). 

We’ve already established that as far as the economy is concerned, you don’t exist as an employee (the covenant of works) unless you live in the El Paso-sized community employed by the top five companies in the S&P 500. Now you must face the fact that you also don’t really exist as a consumer (the covenant of stuff). You aren’t actually a person at all. You’re an asset, like a blast furnace.

Try not to break down! Because if you do, the economy may experience divine retribution and I may have to relocate to Rhode Island.