Business is Booming, So Where Are the Jobs?
From the Atlanta Journal-Constitution:
Last month, UPS executives proudly detailed the profitable quarter that drove the company cash trove above $4 billion. Wall Street’s response? “Show me the money.”
“You’re sitting on a lot of cash,” complained one analyst in a conference call last month with executives, joining a chorus of investors who wanted to know why UPS wasn’t paying them higher dividends or using the money to expand the company.
It’s a question that could be asked of a lot of companies these days.
Economic growth has been anemic overall, yet corporations that cut deeply during the Great Recession are seeing soaring profits. And they’re stuffing mountains of cash into their bank accounts.
But they are not hiring.
Company cash reserves topped $1.84 trillion in the first quarter, up $382 billion from a year earlier, according to the Federal Reserve.
The nation’s businesses are sitting on that cash for a variety reasons, including still-weak customer demand and an uncertain outlook for the global economy. After the recent painful downturn, businesses say they’re also worried about how taxes and regulatory policies could change under President Obama’s administration.
“A lot of companies had near-death experiences in the last year,” said Kurt Kuehn, chief financial officer at Sandy Springs-based UPS. “People are still feeling the shock.”
Most companies probably will remain jittery — and slow to spend or hire — for several more months until there’s a brighter forecast for the economic and business climate, he added.
Companies are looking for stability in the economy, so they can plan for it. But, as John Stossel explains, the government keeps throwing the economy out of kilter, not allowing businesses to be able to plan.
Why isn’t the economy recovering? After previous recessions, unemployment didn’t get stuck at close to 10 percent. If left alone, the economy can and does heal itself, as the mistakes of the previous inflationary boom are corrected.
The problem today is that the economy is not being left alone. Instead, it is haunted by uncertainty on a hundred fronts. When rules are unintelligible and unpredictable, when new workers are potential threats because of Labor Department regulations, businesses have little confidence to hire. President Obama’s vaunted legislative record not only left entrepreneurs with the burden of bigger government, it also makes it impossible for them to accurately estimate the new burden.
In at least three big areas — health insurance, financial regulation and taxes — no one can know what will happen.
And hence they’ll take a wait-and-see attitude. When the stock market is up and down all over the place, investors sit on their cash and wait for a definite bull, or even bear, market. The same goes for corporations. If there is no trend, they aren’t going to jump into the volatility. And the government is creating that volatility in the name of removing it. But the result is:
New intrusive rules for health insurance are yet to be written, and those rules will affect hiring, since most health insurance is provided by employers.
Thanks to the new 2,300 page Dodd-Frank finance regulatory act, The Wall Street Journal reports, there will be “no fewer than 243 new formal rule-makings by 11 different federal agencies.” These as-yet unknown rules will govern lending to business and other key financial activity.
The George W. Bush tax cuts might be allowed to expire. But maybe not. Social Security and Medicare are dangerously shaky. Will Congress raise the payroll tax? A “distinguished” deficit commission is meeting. What will it do? Recommend a value-added tax?
Who knows? But few employers will commit to a big investment with those clouds hanging over our heads.
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