Corporations Holding $1.8 Trillion In Profits?

By Justin Gardner | Related entries in Business, Money

Listen, if a public or private company makes money and wants to keep it close to their chest, that’s their right. But those same businesses can’t then go and collectively fault the White House’s policies for preventing them from hiring more people. And that’s exactly what they’re doing through the U.S. Chamber of Commerce and other business groups.

First, the Chamber story…

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.

Onerous regulations? What they mean are ANY new regulations that make sure workers and consumers are protected from corporate mistakes.

So what did the White House say?

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.

Then, a little bit more on the money these companies are sitting on:

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. [...]

A survey last month of more than 1,000 chief financial officers by Duke University and CFO magazine showed that nearly 60 percent of those executives don’t expect to bring their employment back to pre-recession levels until 2012 or later — even though they’re projecting a 12 percent rise in earnings and a 9 percent boost in capital spending over the next year.

When asked why companies are holding back so much, many economists cite broader uncertainty that goes well beyond anything happening in Washington. Firms aren’t sure whether the economy can sustain a strong recovery. And as long as consumer spending remains low, there’s not much incentive for companies to ramp up.

I’m sure you’re spotting the inherent paradox here. Consumer spending won’t go up as long as firms aren’t hiring. It’s not secret that jobs stimulate far more consumer demand and spending, not the other way around. So what these businesses are essentially asking the American people is to spend money they don’t have so they might start hiring again.

Yeah, that’s a smart plan…

So, basically, there’s literally nothing anybody can do to make these companies hire, even though they’re starting to see record profits again.

Good times.


This entry was posted on Thursday, July 15th, 2010 and is filed under Business, Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

19 Responses to “Corporations Holding $1.8 Trillion In Profits?”

  1. Tweets that mention Donklephant » Blog Archive » Corporations Holding $1.8 Trillion In Profits? -- Topsy.com Says:

    [...] This post was mentioned on Twitter by Justin Gardner, Donklephant. Donklephant said: DONKLEPHANT: Corporations Holding $1.8 Trillion In Profits? http://ow.ly/189u7U [...]

  2. Alistair Says:

    So in other words we could be seeing Morning in America again Justin.

  3. Jim Satterfield Says:

    They won’t hire even though the employees remaining after all of their layoffs are not happy about the workloads they continue to carry and the quality of the work must be questioned when staffing is often too low for the amount of work that needs to be done.

  4. Chris Says:

    Well I know what will fix it. Tax cuts for corporations clearly. We need to give them more money to pay their CEO’s. Then maybe they’ll hire a new cleaning lady.

  5. JimS Says:

    BTW, has the U.S. Chamber of Commerce been anything but a shill for the Republican Party under its current leadership? I don’t think it’s a business group any more.

  6. SC Says:

    Oh, you miss the gem there. They say they don’t expect to hire until 2012. Golly, what happens in 2012? Presidential election year…and I bet anything that the 2012 hiring won’t happen until the election is all but over, so they can try to get a more business friendly (i.e. an anti-regulation Republican) in the White House.

    In other words, they’re willing to put up with short term pain (if that’s the right word for sitting on piles of cash but not hiring new staff), in order to let their political friends make hay off the resulting high unemployment.

  7. kranky kritter Says:

    Personally, I wouldn’t expect any well-run business to hire people just because they have the money to do it. They hire folks when business conditions warrant it, Like, they see increased demand, see an opportunity for a new product or increased market share, and so on. Businesses that leaned out operations when things went sour are probably making good profits now by selling off built-up inventory,

    I’m unemployed right now, and I sure want a job. Hopefully whoever hires me knows how to run their business. You hire folks when you think it will improve your bottom line. I’m ok with that.

  8. JimS Says:

    kk,

    I think the problem is that a large part of modern American business management just doesn’t care about decent personnel management. They don’t think about what overloading the current staff does to morale and productivity. They also don’t look at the long term and see that the resentments building up now will cost them good employees when/if the job market improves.

  9. Solomon Kleinsmith Says:

    This actually is a non story that the media has made into a big story. 1.8 trillian in reserves isn’t out of the ordinary at all, its actually right in line with the trend over the last few years, before the economy tanked.

  10. Tully Says:

    Talk about the GIMME mentality! Cluelessness.

    Businesses don’t exist to provide jobs. They exist to make money. They don’t hire people to try to create demand for other businesses, or just because some people could use jobs.

    If you don’t like it feel free to start your own business based on such philanthropic principles. Let me know when you’ve got that IPO ready … so I can short it.

  11. kranky kritter Says:

    I think the problem is that a large part of modern American business management just doesn’t care about decent personnel management. They don’t think about what overloading the current staff does to morale and productivity.

    Business management is VERY good at measuring productivity. And I think most managers have a good sense of how many folks they need to get a decent job done. Does that include prevailing upon illusory loyalty and “you’re lucky to have a job” to get employees to work harder and/or possibly accept lower pay? Absolutely.

    And that’s where morale comes in to play. And I agree that management really doesn’t care that much about morale. I think it’s quite naive to think they do. Surely some do, but they’re the exception.

    They also don’t look at the long term and see that the resentments building up now will cost them good employees when/if the job market improves.

    This strikes me as further naivete. The trend is definitely towards “just in time” labor provision, meaning you staff up with contract workers on a by-project basis and so on. My sense of human nature is that most folks don’t battle inertia. Resentful employees are seldom actually driven to move on unless they experience a situation where their skills are in high demand and the labor supply is short. How many folks out there have a reasonable expectation to experience that in their industry over the next 5 to 10 years?

    People will grumble, and enough of them will stay put to keep the enterprise afloat. Some folks will go, but no one is irreplaceable. If anything, older skilled employees with a high self-value on their worth as an employee are more likely than ever to find themselves competing with someone who will work hard to learn quickly for lower pay. If you want to lie to yourself about the truth of that, you go ahead. I’m too kranky and skeptical a guy to waste my time consoling myself with unrealistic illusions about how the world should be.

    So while there may in some senses be truth to what you are saying, I think you really should consider whether you are tempering you perspectives with a realistic sense of the world as it is. I wonder what world you live in where you expect people in top management to reward labor more generously than circumstances dictate. Where you say “the problem is that…” I just accept that’s how the world functions. If you are personally motivated to make that different, the only plausible real-world solution is to start your own enterprise and find a way to beat your competitors while being more “fair” and generous to your employees.

    That’s not the kind of stuff that can be legislated or regulated into being. Like the late Joe strummer once sang, “you don’t face your demons down, you gotta grab ‘em Jack, and throw ‘em to the ground.” You can’t just face these corporations you don’t like and dictate how they should behave. That never works. Human nature flows through the loopholes. But if you can wrestle a bad corporation by leading a “good” corporation, then you prove the superior merit of your approach.

  12. MorningStar Says:

    This is awful, but I sure don’t want the USG getting involved. What is our country coming too?

  13. WHQ Says:

    If you are personally motivated to make that different, the only plausible real-world solution is to start your own enterprise and find a way to beat your competitors while being more “fair” and generous to your employees.

    That’s exactly what Henry Ford did.

  14. WHQ Says:

    I should add, though, that he also hated unions. I wouldn’t want to incite uncalled-for dreamy-eyed-ness among pro-labor readers.

    captcha: motives considered

  15. WHQ Says:

    Businesses don’t exist to provide jobs. They exist to make money. They don’t hire people to try to create demand for other businesses, or just because some people could use jobs.

    This is quite true, though they might also create demand for themselves along with others, and vice versa. But it still doesn’t work that way in reality. Individual spheres of self-interest don’t magically merge into a great oneness of systemic interest, at least not outside of John Lennon’s former head.

    Talk about the GIMME mentality! Cluelessness.

    I’m not sure what this was specifically addressing, Tully. But the “GIMME” can be taken from “GIMME a job so I can support my family.” A lot of people need and want work, not a handout. It may be unrealistic to think that companies will hire simply because they have the money to right now, rather than because they think they will need the output to make more money later, but wanting a job isn’t a particularly contemptible sentiment, I don’t think.

  16. Chris Says:

    http://www.thenation.com/article/37889/no-oligarchy

    seems relevant.

  17. WHQ Says:

    Here’s another:

    http://finance.yahoo.com/family-home/article/110113/how-the-rich-are-winning?mod=family-love_money

  18. Chris Says:

    So what is that article trying to say WHQ…? That the trickle down has a dam somewhere, holding back the floodwaters of cash that is supposed to create jobs and improve the economy? lol. sigh.

  19. Donklephant » Blog Archive » SHOCK: Goldman Sachs Fined Half A Billion By S.E.C. Says:

    […] Corporations Holding $1.8 Trillion In Profits? Open Thread […]

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