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The American economy continues to recover. Economic growth remains tepid. In 2012, real Gross Domestic Product grew by 2.2 percent. This is up from the 2011 growth rate of 1.8 percent, but above the 2010 rate of 2.4 percent.

On a quarterly basis, real GDP grew by 1.6 percent, year-over-year, in the fourth quarter of 2012 after growing 2.4 percent, year-over-year ,in the first quarter of 2012, 2.1 percent in the second quarter, and 2.6 percent in the third quarter.

And, this is before the full effects of the sequester cuts hit the economy.

The U. S. unemployment rate dropped to 7.7 percent in February. The rate had been stuck at 2.8 percent or above since September 2012. The February rate was the lowest rate achieved in the United States since December 2008.

So, the economy continues to recover and seems to be doing better in many different areas.

Yet, the recovery is not even.

The headlines in the New York Times reads, "Recovery in U. S. Lifting Profits, Not Adding Jobs."

Employee income as a percentage of national income dropped to 61.7 percent in the third quarter of 2012, the lowest level attained in the United States since the late 1960s.

At the same time corporate profits were above 14 percent of national income in 2012. The only time this level had been reached was in one year in the 1950s.

And, what are corporations doing with all these profits?

"U. S. companies are making record profits. And more of the money is staying offshore, and lightly taxed." This from the Wall Street Journal, "More Profits Parked Offshore." The Journal analyzed 60 big U. S. companies and found that they "parked" $166 billion offshore last year.

There was no use for them in the United States and by keeping them offshore they avoided U. S. taxes.

Many have felt that with the economic pickup in the United States that merger and acquisition activity would at some time pick up. But, with the tepid economic growth that has been achieved and the lack of leadership in Washington D. C. and the uncertainty that this has created, healthy corporations are just not finding a reason to commit their resources to acquiring a lot of "used" assets.

The place that corporations seem to be using money is to pay dividends and to buy back stock. "U. S. companies are showering investors with a record windfall in the form of dividends and share buybacks…." This is from the Wall Street Journal.

I wrote about this several times in the last quarter of 2012. There just was no place that firms felt was an economically sound place to put their money and with tax increases coming, they saw a need to get funds into the hands of their owners.

Furthermore, now that the largest banks in the country have passed the Federal Reserve "stress tests" several banks "are now expected to boost dividends and share buybacks."

What does this say about the economy?

If large corporations are "making record profits" and are using the funds they have accumulated to buy back their stock or to pay dividends rather than purchasing physical capital to expand operations it says, to me, a lot!

It says to me that corporate managements do not see much of a pickup in the economy, do not see much of a reason to hire a lot of people to support an increase in production, and do not see the "mess" in Washington, D. C. getting resolved.

What seems to be biggest contributor to the economic growth that we are seeing?

Wealthier households!

"The good news for the economy is that wealthier households pack an outsize punch in terms of spending. The top 20 percent of earners account for about 38 percent of all spending, according to Labor Department data, nearly as much as the bottom three-fifths of earners, combined." This is from the Wall Street Journal.

And, how is this reflected in expectations? Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corp. (NYSE:TGT) have both warned of "sluggish starts in 2013." Dollar Tree Inc. (NASDAQ:DLTR) told investors last week that the consumer is both "burdened and concerned." These retailers mostly serve lower- and middle-income Americans.

The upscale companies? They are expecting something better. For example, luxury retailer Saks, Inc., said it was expecting sales in the 3 percent to 5 percent range in 2013.

The recovery that is taking place is skewed. It is skewed toward the wealthier American. In some cases, it is skewed toward the top 5 percent.

The recovery aimed for the middle classes is not doing a great deal to help the middle class…or below.

All the money being pushed into the economy is not going into the production of real goods. Rather than working itself around in manufacturing and construction most of the money the Fed has been generating has been circulating around and around and around in the financial sector of the economy. In otherswords money velocity in the real part of the economy has been low and is remaining low. Money velocity in the financial part of the economy has accelerated over the past three years and seems to be rising even further.

Or, the financial pyramid on top of the real economy continues to grow while the real economy hardly grows at all.

And, the more the government tries to "push" economic expansion to lower unemployment in the "same old way," the more the wealthy people or the "smart" people can "game the system" and make more and more money.

Economists can really seem out of touch with the world when they continue to insist that governments need to keep on stimulating the economy to "make things better" for the less-than-wealthy, and then assume that smart people will not learn how to use these policies to enhance their own gains.

It is a lopsided economic recovery, but I see nothing on the horizon that would lead me to think that it will be any different in the future. In that case, be one of the "smart ones" and use the government's policies to your benefit.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: The Lopsided Economic Recovery