No Jobs = No Demand = No Jobs…
The Washington Post tells us water is wet: Companies Piling Up Cash But Not Adding Jobs
Nonfinancial companies are sitting on $1.8 trillion in cash, roughly one-quarter more than at the beginning of the recession. And as several major firms report impressive earnings this week, the money continues to flow into firms’ coffers.
Yet all the good news from big business hasn’t translated into much promise for jobless Americans, leading many to wonder: If corporations are sitting on so much money, why aren’t they hiring more workers?
The answer to that question has become a political flash point between the White House and big business groups such as the U.S. Chamber of Commerce, which held a jobs summit Wednesday and accused the Obama administration of dumping onerous regulations on businesses. That has created an environment of “uncertainty,” which is causing firms to hold back on hiring as the unemployment rate has hovered near 10 percent, the Chamber said.
The White House countered that companies are wary of hiring not because of new regulations but because they’re still waiting for consumer demand to return. The administration also claimed credit for 3.5 million jobs created by the stimulus bill from last year.
What are these “onerous demands” – Keep poison out of your products? Don’t sell things that kill the buyers? Don’t destroy the planet to make a profit? What are the regulations the Chamber is talking about?
If these regulations are so “onerous”, how did these corporations manage to salt away $1.8 trillion in cash?
The financial industry is facing new regulation because they blew up the global economy, and the oil companies are being look at because there is crude gushing into the Gulf, but no one else is being talked about. This makes as much sense as all of the NRA claims that “Obama is going to take your guns”, another creation from whole cloth. This preemptive whining isn’t attractive in small children, much less CEOs.
8 comments
Every major corporation made enormous profits last quarter. Apple Computer alone has $41B in cash in the bank and had a net profit of $3.07B for the first quarter. So, who is benefiting from all this profit? Well… let’s look at some numbers. In 2008, while revenue grew by 52.5%, Apple’s operating expenses only grew by 30%. In 2010, while Apple looks to grow its revenue by 47.8%, even aggressive estimates for operating expenses put it in the rage of only 31% growth.
In other words, businesses are becoming more and more profitable… but rather than hiring or giving raises to their current workforce, they’re shoveling the money into reserves as profits. This would have been inconceivable 40 years ago because the money would have just been siphoned away as taxes, which is why until the Reagan era, every improvement in productivity resulted in an increase in employee wages if the absence of customer demand justifying new hiring. But starting with Reagan — and especially with the Bush II tax cuts — wages started falling further and further behind as companies raked in higher and higher profits due to greater and greater productivity and just stashed the profits away as cash or gave it as enormous bonuses to the top executives. After all, if it’s not going to get taxed away, why spend it on your mere *workers*?
The problem with this is that higher wages would create more demand, and thus hiring… but without the demand, well. We currently have 5 unemployed people for each advertised job opening in America. That tells the story in a nutshell, and is the inevitable result of companies putting their extra cash under the mattress instead of giving pay raises to their workers.
– Badtux the Economics Penguin
Why do they say the regs are “onerous”? I don’t know who the owner is, but the owner ain’t us.
That was punny, Steve, but not up to the high level of the “French foreign lesion”, which is certainly a 5 groan effort. 😉
Mr. Duff, what you posted reinforces the entire point of my post, and our explanationa – there is no demand, so there will be no jobs.
Now is not the time for cost cutting or deficit reduction, it is the time for stimulus, real stimulus, not the watered down version that Obama, who is to the right of the Conservative Party of Britain, put forward. The economy needs a major boost targeted at state governments and fixing the infrastructure that Republicans have ignored since Reagan.
The articles you link to support what Badtux, Painted Jaguar, and I have all been saying, that you have to use the tools that were proven to work in the FDR administration, and stop thinking like Herbert Hoover.
I didn’t vote for Obama because I could tell from his voting record that he was well to the right of center, and right-wing policies would fail this time, just like they failed the last time.
The austerity moves in the UK are going to give you a slice of the misery, so I wouldn’t be celebrating, I would pay off all debt and hold on to any cash you can. Remember that gold is a hedge against inflation, it will cost you dearly in deflation.
A commenter on this post explains the real root of the current economic tribulation:
I saw that Terry Savage rant somewhere, and all I could think of was that these people pretend they are Christians.
When it is in full summer I offer people coming by ice water or lemonade, even Mormons or Jehovah Witnesses, because I don’t want them dying in my yard [it annoys the guy who mows the lawn, and Waste Management refuses to pick up bodies]. It’s hot down here and people out walking the neighborhood may not realize how easy it is to get in trouble.
For all anyone knows that lemonade stand could have been a project for school or a church requirement. If it was for school, those girls should have an easy A describing the reaction of a whacko to kids giving away lemonade.
It may also have been a decision to wipe out the competing lemonade stands and grab marketshare, just like WalMart does. How many web sites are there that started out giving stuff away, and then shifted to a profit-making model. Most of the major blogging sites work like that – the basic service is free, but if you want more you have to pay. You see sample give-aways all the time in supermarkets.
Some people really need to stop trying to frame everything as a policy decision.
I’ve been to countries that called themselves communist, socialist, and even fascist [Spain under Franco] and none of them gave away free lemonade, but I got a glass at a Sam’s Club for free.
Mmm. Remember how ATM’s were supposed to lower our banking costs? My last account charged me $15 for making an indoor deposit. I’ve stopped patronizing Home Depot since they started trying to put all their cashiers out of work by having the customers do the job.
These moves are to increase profits, not improve service or reduce unnecessary costs, only to generate higher profits.
In the early days they charged you to use the ATM, so I wrote myself checks and cashed them, because I wasn’t going to pay to do their job. That was in California. In New York I used them all the time because my bank allowed me to pay most of my bills with the ATM and didn’t charge me anything.