Jobless Suffer as Corporate Cash Hits $1.18 Trillion

[Emit]

Feb. 11 (Bloomberg) -- A majority of companies in the Standard & Poor’s 500 stock index increased cash to a combined $1.18 trillion while simultaneously reducing spending, keeping a jobs recovery on hold.

Caterpillar Inc., Eaton Corp., Walgreen Co. and General Electric Co. are among 256 companies that ended last quarter with $518 billion more cash than a year earlier after cutting capital spending by 43 percent. Economists say the dearth of investment is keeping the jobless rate at about 10 percent as the U.S. emerges from its worst recession since the 1930s.

“It’s not clear we are going to see the type of growth following this recession that we’ve seen in previous recessions,” Sandy Cutler, Eaton’s chief executive officer, said in an interview yesterday. That view “is leading people to be cautious as to their rate of reinvestment, and right in parallel with that, in terms of hiring additional employees.”

Investment and hiring may remain low as companies bring unused capacity back on line and rely on productivity gains to fill demand, said Edward Lazear, former economic adviser to President George W. Bush and a professor at Stanford University in Stanford, California. Employers have eliminated 8.4 million jobs since the U.S. slipped into recession in December 2007.

“About three years into the recovery, you start getting significant wage growth,” Lazear said in an interview. “It’s unfortunate because it means workers suffer for a pretty long time after the recovery takes off.”

~snip~

http://www.bloomberg.com/apps/news?pid=20601109&sid=a6kXsL1Q5FYc

[Zoeisright]

1. Unbelievable. It really is fascism now.

I hate corporations, CEOs, and banksters. They, along with repukes, have ruined this world.

[Xenotime]

6. This is just sick.

[FreakinDJ]

2. Well as the Banks refuse to make loans..........

Businesses will have to resort to financing their self

Wall St. Banks are Forcing the Double Dip

[RUMMYisFROSTED]

3. The last skirmishes of class warfare are now being fought.

Just a simple mop-up operation at this point.

[leftstreet]

10. We haven't even started fighting back yet n/t

[dkf]

4. Looks like they foresee rough times.

I think they are reading the tea leaves correctly.

[Alias Dictus Tyrant]

5. The lack of investment is caused by uncertainty

Companies invest in jobs if they think there is a reasonable chance that it will be worth the money. There is so much uncertainty and shenanigans going on in economic policy that they don't know if a good investment in a thousand jobs today will be an albatross tomorrow because of some new policy. A lot of it is just a lack of clear leadership and policy on economic matters from the government that make it difficult to predict what policy will be next year.

[FreakinDJ]

7. Companies invest when Tax Incentives encourage GROWTH

Right now we only have Corporate Tax incentives that encourage Out-Sourcing

[Statistical]

13. Even with incentives companies won't stop hoarding cash.

Having cash gives companies options.

In a recession companies will not hire people just because of incentives. What good is an incentive if you get caught in a cashflow trap and can't make bond payments = bankruptcy & liquidation.

Companies will hire and stop hoarding cash for one reason and one reason only: because they have to.

Because not doing so will be so horribly expensive (in terms of lost revenue/market-share/profits) that their fear of the future is less than their fear of competitor gaining on them.

[Mari333]

14. Exactly!! the same trickledown BULLSHIT Reagan foisted on us

still going on..total BULLshit.

[FreakinDJ]

16. I've seen a few Dem Senators on CSpin making noise

about the FAILED policies of the RATpubliCONs but as of yet haven't seen any Real Reforms

I wish the DEMs would "Wake the Fuck Up" as this is some thing a LARGE Majority of Americans understand and can get behind with their Vote.

We need Meaningful Regulatory Reforms NOW and we need it like yesterday

[endless october]

8. more aggressive antitrust action needs to be taken.

smaller corporations actually have to compete and have less ability to act against the public interest.

the dude that owns the restaurant down the street from you is still capitalism, but he isn't walmart.

[kentuck]

9. Profits are too easy...

They should have to work harder for them. The system needs to be tilted back toward the workers.

[FreakinDJ]

17. "Short Term Profits with Long Term Consequences"

This is what I've seen coming out of the Senate Banking Committee hearings

[Initech]

11. Fuck CEOs, banks, big corporations and all those assholes.

[Statistical]

12. Not surprising. Companies are conservative in bad times.

Not conservative as in Republicans but conservative in terms of not taking risk, not pushing the envelope.

If company thinks there is trouble on the horizon they will hoard cash.

Companies have debt obligations. Getting stuck in a cashflow squeeze as poor economy due to reduced revenue is a trap that is best avoided by having a fortress of cash.

In economics this is called "failure of the individual". Each individual company is doing what is the most likely to allow them to survive meanwhile the combined effect is what causes the situation that they are fearing.

This is why companies can't push themselves out of a recession on their own. It requires govt funding to create a cycle where increased demand requires increased hiring which causes increased demand which causes increased hiring..... etc.

The so called "stimulus" bill was mostly non-stimulative. It was a lot of untargeted spending with a fancy name. True stimulus needs to put a substantial number of people to work and increase revenue at the bottom (poorest people tend to spend 100% of their income).

[upi402]

15. They blame US for not spending. Not firms for hoarding cash or banks for not lending

How about taxing their profits and huge incomes? Close loopholes, investigate and confiscate all the windfall profits and crimes? Not with corporatists owning both parties.

[Statistical]

18. Well taxes should go up BUT.

taxing profits isn't going to make companies spend less and hang onto more cash. If anything it will make them spend EVEN MORE less.

Personally I have cut back on spending despite being employed during the recession. Most people I know are doing the same thing.
It is just natural behavior in times of uncertainty to reduce spending. You can't tax that away.

That being said corp taxes should rise but it won't solve this problem.

[Echo In Light]

19. Fascist country

[blindpig]

20. That's what I call 'due diligence'

That is Capitalism the way it is supposed to be done.

That is what is wrong with Capitalism.

[troubledamerican]

21. Where's Donald Rumsfeld's $2.3 Trillion?

On the golden BAD NEWS DUMP DAY of September 10, 2001:

http://www.youtube.com/watch?v=3kpWqdPMjmo