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Related topics: economy, jobs, China, Intel, Anthony Mirhaydari

Clearly, the economic situation is improving. Corporate profits are at record highs. New jobs are slowly being created and the unemployment rate is falling. Consumer spending is up. Stocks have nearly doubled in the last two years. We're a long way from the dark days of 2008-2009.

Yet the gains have not been equally distributed. Where you sit in the socioeconomic strata largely determines how you view the economy and how much you've benefited from the recovery so far.

If you are well-educated and relatively well-to-do, and you have a sizable portfolio of financial assets, chances are you're feeling pretty good right now. You're probably working. You've enjoyed the stock market's doubling from its bear-market low. And you've probably even managed to convince your boss to give you a raise.

If you are less fortunate, with fewer assets and no college degree, and you are more reliant on that day-to-day paycheck, things have hardly improved at all. And now, with the costs of fuel and food on the rise, things have taken a turn for the worse.

By all indications, this is a recovery only if you're rich.

Image: Anthony Mirhaydari

Anthony Mirhaydari

It's worth remembering that rising inequality was largely responsible for getting us into this mess in the first place. Over the last 10 years, in the wake of the dot-com blowup, Americans used cheap credit and rising home equity to mask the fact that in inflation-adjusted terms, their wages weren't growing. There were social consequences, too: People were forced to work longer and harder, and embrace the two-income earner lifestyle to keep up.

After the Great Recession, there was hope that these problems would fade. But they haven't. Now, our two-speed recovery could be sowing the seeds of the next crisis. But instead of financial turmoil, the next iteration will likely play out in the political sphere, as it has in places like Greece, Egypt and even Wisconsin as new pressures are placed on the working class.

Thankfully, there are signs that change -- positive change -- could be coming.

Shaky foundations

There are structural problems at work here. They relate to the fact that over the last 40 years, labor has become less and less valuable relative to capital in the global economy. Those with cash to invest or machinery to sell have done well. Those selling a hard day's work with their hands, their backs or their minds have suffered.

Factors for this include technological innovation, globalization and, recently, record productivity gains as businesses have used the threat of firings to squeeze more and more work out of each employee.

And of course, there has been a massive influx of new laborers into the global workforce: According to the IMF (.pdf file), there has been a fourfold increase in the number of workers competing in the global market since 1980. And this army of new workers has been cheap to hire. Workers in places like China, India and the former Soviet Union have been willing to accept wages from one-half to one-tenth those seen in rich countries.

To put it bluntly, U.S. workers were simply too expensive. And as executives has engaged in wage arbitrage (thanks to lower trade barriers) and defanged private-sector unions, wages and benefits in the United States have been pulled down toward the global mean.

As a result, heading into the recession, more U.S. jobs were cut than historical models would suggest based on the depth of the economic contraction. And as we've recovered, job creation in the United States has lagged that of places like Australia, Canada, Germany and the United Kingdom. Because of all this, corporate profits have surged, and they continue to represent a larger and larger share of the overall economy -- a trend that started 30 years ago.

Wages and salaries as a % of GDP  © MSN Money

On the other hand, labor's share of the economic pie has dropped to its lowest levels since records started after World War II. This is a global trend that is affecting all of the advanced economies. But it's hitting the United States particularly hard.

It's better on top

For those on top, things are great. They've benefited from their ownership of corporate bonds and stocks. And they've benefited from the wage gains that have accrued to the highly skilled and educated -- setting them apart from the great masses of unskilled laborers in Asia, Africa and Latin America. Right now, the unemployment rate for those with less than a high school education is a whopping 14.2%, compared with just 4.2% for those with a four-year college degree or more. That's up from unemployment rates of 5.8% and 1.7%, respectively, in 1999.

The evidence suggests that much of the recovery in consumer spending has been driven by the upper crust. You may have heard that the University of Michigan's Index of Consumer Sentiment jumped 4.4% last month to a three-year high as people became more optimistic about the economy. But the gains were driven exclusively by high-income earners: The sentiment index rose by 9.7% for households with incomes above $75,000 but fell by 1.4% among lower-income households.

Consumer Confidence Index by Income  © MSN Money

This is a continuation of a trend that's seen since the recession ended back in 2009. As shown above, improvements in the Conference Board's Consumer Confidence Index have varied by income level. While confidence has bounced back for those in the upper-income brackets, it continues to languish for everyone else. For those making between $25,000 and $35,000, there has been hardly any improvement since the recession officially ended in the summer of 2009.

It's no wonder: Income growth has stagnated, especially for the poor and middle class. For those in the lower 60% of the country in terms of household income, in inflation-adjusted terms, their earnings haven't gone anywhere since the late 1980s. In 1989, the average household income for these folks was $29,685, compared with $30,114 now.

Mean Household Income Received by Each Fifth and Top 5 Percent -- 2009 Dollars  © MSN Money

That has translated into rising income inequality as the top 5% of the population captures an ever-increasing share of the economy. Current levels of inequality haven't been seen since the lead-up to the Great Depression back in the 1920s.

But there is reason to believe things might get better soon.

Diminishing supply

The good news is some of the structural issues that have weighed on the working class are beginning to lift.

Higher fuel prices and geopolitical instability are increasing the costs of outsourcing and shipping from factories far afield. Surging inflation and wages in places like China, where the once seemingly inexhaustible pool of workers has started to diminish, are pushing up production costs. There are new reports of Chinese factories grinding to a halt for want of laborers. Even white-collar managers and engineers are being forced out of their comfy office chairs to spend time on the assembly lines. The lack of manpower is becoming acute in the Middle Kingdom.

These factors are combining to push up the price of Chinese exports -- and ontributing to inflation here in the United States. According to Société Générale economist Aneta Markowska, within the next few months the cost of trinkets made in China will start rising at a 2%-plus annual rate, versus the current core CPI rate of 0.9%. After 15 years of exporting "disinflation" to the West via shiploads of cheap manufactured goods, China is set to start spreading higher prices.

The longer this continues, the less competitive goods from China will become compared with U.S.-made products. That's a good thing from the perspective of the average American worker.

Markowska notes that she's seen "numerous reports in recent weeks about U.S. importers facing significant cost hikes and scrambling to find lower-cost production centers." Alternative exporters, such as Vietnam, Thailand and India, are being looked at. But it will take months, if not years, for companies to relocate production. And given the turmoil roiling North Africa and the Middle East, political risk is suddenly a very real concern again.

U.S. Dollar Index, 4 Years, Weekly Bars  © StockCharts.com

Such pressures make hiring workers and building things in America more attractive. Also contributing is a weakening dollar, which now threatens to fall through four-year trend line support, as shown in the chart above. While a weaker greenback always damages national pride and contributes to inflation by pushing up the prices of oil and imported goods, it also boosts our competitiveness -- turning the tide so the benefits of export-led growth accrue to United States instead of places like China and Germany.

Indeed, Intel (INTC, news) recently announced it will spend $5 billion to build a new semiconductor facility in Arizona that will create thousands of new jobs. And in recent months, measures of manufacturing and service-sector activity have blasted higher to new recovery highs. The ISM Manufacturing Index's employment sub-index pushed to its best levels since the early 1970s. Purchasing managers in the Chicago area indicated the fastest pace of activity since the late 1980s as new orders pour in.

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But make no mistake: We're a long way from out of the woods.

The consumer squeeze

We're now in a race against time, left hoping that job creation will ramp up before inflationary pressures can damage consumer and business sentiment and cause a growth scare like the one seen during last summer's eurozone debt crisis. And over the near term, consumers waiting for the new jobs and higher wages will be squeezed by rising commodity prices.

And for U.S. workers, the healing will be slow.

Markowska, of Société Générale, is looking for the unemployment rate to fall very slowly, ending 2011 at 8.7% and 2012 at 8.4%. It's at 9% now. That will help keep wage growth low for most Americans. UBS economist Thomas Doerflinger is looking for wage growth of just 2.7% this year and 1.5% in 2012 as the current payroll-tax cut expires.

The investing angles

As is often the case, investors can make moves to play into this trend. The team at UBS recommends avoiding consumer staples stocks, because they are vulnerable to higher commodity and energy prices at a time when many consumers are still cautious about spending. On April 1, Whirlpool (WHR, news) will raise the price of its washing machines by up to 10% as it tries to pass on higher steel costs. Kimberly-Clark (KMB, news) is just one of many toilet paper makers that have narrowed the size of their rolls in an effort to protect profits.

Another strategy is to embrace wage inequality -- because it isn't going away -- by focusing on the low end with retailers like Family Dollar Stores (FDO, news), and on the high end with retailers like Nordstrom (JWN, news).

At the time of publication, Anthony Mirhaydari did not own or control shares in any company mentioned in this column.

Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at anthony@edgeletter.com and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.