Profits Are Booming. Why Aren’t Jobs?

New York Times ^ | January 8, 2011 | Michael Powell

[khnyny]

To gaze upon the world of American corporations is to see a sunny place of terrific profits and princely bonuses. American businesses reported that third-quarter profits in 2010 rose at an annual rate of $1.659 trillion, the steepest annual surge since officials began tracking such matters 60 years ago. It was the seventh consecutive quarter in which corporate profits climbed.

Staring at such balance sheets, you might almost forget that much of the nation lives under slate-gray fiscal skies, a place of 9.4 percent unemployment and record levels of foreclosures and indebtedness.

And therein lies the enduring mystery of this Great Recession and Not So Great Recovery: Why have corporate profits (and that market thermometer, the Dow) spiked even as 15 million Americans remain mired in unemployment, a number without precedent since the Great Depression? Employment tends to lag a touch behind profit growth, but history offers few parallels to what is happening today.

“Usually the business cycle is a rising-and-falling, all-boats-together phenomenon,” noted J. Bradford DeLong, an economics professor at the University of California, Berkeley, and a deputy assistant secretary for economic policy in the Clinton Treasury Department. “It’s quite a puzzle when you have this disjunction between profits on the one hand and unemployment.”

A search for answers leads in several directions. The bulls’ explanation, heard with more frequency these days, has the virtue of being straightforward: corporate profits are the economy’s pressure cooker, building and building toward an explosive burst that will lead to much hiring next year.

The December jobs numbers suggest that that moment has yet to arrive, as the nation added just 103,000 jobs, or less than the number needed to keep pace with population growth. The leisure industry and hospitals accounted for 83,000 jobs; large corporations added a tiny fraction.

[VRWCmember]

If that were true they would pay dividends to their shareholders instead of making billionaires out of their corporate officers.

Any compensation to their corporate officers is actually a pre-tax expense, so the record profits that are the subject of the article are AFTER these massive compensations to the corporate officers are paid out. Depending on which firm you are discussing, most of the major corporations ARE paying dividends to their shareholders. If not, the earnings retained are reinvested into the firm for the purpoose of generating additional cash flows (returns) which increase the value of the stock so the investors can achieve their returns via capital gains.

[dfwgator]

The Boards of Directors of corporations have Singluar responsibility:

When you have Interlocking Directorates, the responsibility is to scratch each others' back.

[JDW11235]

Assuming you care to be corrected, and not just a moron, (Tariff) is an example of what I said “An apportioned opt out tax is the only constitutional tax,” being representative, not exclusive, but you already knew that, you’re just trolling.

[hedgetrimmer]

Henry Paulson and his Plunge Protection Team. Were you paying attention during the first Bush administration?

Created in 1988, its an unconstitutional UN style ‘working group’ which declined to submit to the federal Freedom of Information Act or to testify in detail before Congress about its activities. In January 1997 Alan Greenspan indicated that the Fed could pursue “direct intervention in market events” , but he gave that speech in Belgium, to the globalists and not to the American citizens who pay is unjustifiable wages.

The PPT coordinated with Banks after 9/11 to buy equities from mutual funds and other institutional sellers if there was evidence of panic.

The Financial Times confirmed that PPT considered “buying U.S. equities” — not just futures. The Fed, said the official, could “theoretically buy anything to pump money into the system,” including “state and local debt, real estate and gold mines, any asset.” And I am sure they have done so since this claim was made public.

The London Telegraph says the PPT is a “shadowy body with powers to support stock index, currency and credit futures in a crash.”

U.S. News & World Report reported in “the final two trading hours on Aug, 16, 2007, the Plunge Protection Team might have encouraged one or two major institutions to buy stock index futures” to prop up the market.

Now with the MSM completely owned by the globalists, no one is apparently reporting the truth.

So free market economy in the US? Bah! As stated earlier on this thread, the Bush Clinton Bush Obama cabal has destroyed it.

[ex-snook]

Hey I was a conservative Reagan Democrat interested in conserving America not selling it down the river for money. The military puts their life on the line for their country, the least that an international job exporter can do is to put some bucks on the line for their country.

However if they no longer consider America their country then they should not be contributing to our election process.

[VRWCmember]

Assuming you care to be corrected, and not just a moron, (Tariff) is an example of what I said “An apportioned opt out tax is the only constitutional tax,” being representative, not exclusive,...

Assuming you care what the Constitution actually says, and not just what you learned in associate professor Obama's Constitutional law class, let's review Article I, Section 8:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Whether you consider a tariff as representative of or exclusively an "apportioned opt out tax", the notion that only an "apportioned opt out tax" passes Constitutional muster is simply not supported by the text of the Constitution. So in reality, the distinction of whether tariff was intended as representative of or exclusively the "only constitutional tax" is an irrelevant exercise in semantics.

[JDW11235]

Actually, that’s relevant. Since the U.S. Constitution also provides that all direct taxes (those imposed upon individuals) must be aportioned, you’ve made my point. Duties, excises, imposts (a tax or duty by definition) and taxes upon goods or services are already capable of being opted out, by not purchasing that good or service. Add apportionment and you can tax just about any good or service. Like I said a tarriff is one example. You have in no way expressed anything other than the fact that you’re incapable of a cogent argument.

[hedgetrimmer]

However if they no longer consider America their country then they should not be contributing to our election process.

BRAVO!

[central_va]

They are not obligated to make their products here.

If their factories and facilities get annexed by their new host country, DONT COME F-ING CRYING TO ME. No "send in the Marines" talk ok Mr. GloBULL? Screw-em.

[central_va]

sqeezed by unions

Non-government union membership is WAY DOWN 6.9% not a factor.....

In 2010, the union membership rate--the percent of wage and salary workers who were members of a union--was 11.9 percent, down from 12.3 percent a year earlier, the U.S. Bureau of Labor Statistics reported today. The number of wage and salary workers be- longing to unions declined by 612,000 to 14.7 million. In 1983, the first year for which comparable union data are available, the union membership rate was 20.1 per- cent, and there were 17.7 million union workers.

--The union membership rate for public sector workers (36.2 percent) was substantially higher than the rate for private sector workers (6.9 percent). (See table 3.)

There are 22 right-to-work states where any company can move to and make a healthy profit.

[khnyny]

Entertaining post. I agree with you - it’s all about next quarters earnings and what is spewed by the “analysts” - hired whores in a lot of cases. Long term strategy is not what happens - it’s all about scrambling and passing the buck. I’ve seen it and it’s not pretty.

I have also witnessed some incredibly stupid corporate decisions based on WRONG statistics, etc., which led to people getting fired for no reason. People were fired who were essential to long term growth and immediate revenue stream. Let’s just say some top people are now paying the price for that little snafu, but only because they have endangered their boss and the company has to look like “it’s doing something to fix the problem”.

[hedgetrimmer]

We the American taxpayers are insuring them with our tax money so if that does happen, we will completely reimburse them for their trouble.

The program is called OPIC and was a showpiece of the Bush USTR office programs run by Robert Zoellick. It was one of the top selling points early on to coerce manufacturing off shore. That and of course the directors could pocket the difference in savings from building products with slave labor but selling it full price as if free American workers were building them.

[central_va]

Our Captains-of-Industry are a bunch of Judas Iscariots without the charm.

[kearnyirish2]

I hope we never violate terms arbitrarily imposed on us by someone halfway around the world; all we’ve done is create a radical state where a secular one had lasted for decades.

[khnyny]

Good point. Without the US consumer other economies would die on the vine. You are suggesting a form of tariff to do business here...makes sense...who else is going to buy their cheap crap?

[arrogantsob]

Read your own confused drivel and you can see why any reasonable person would have concluded that you were specifying that a tariff was the only constitutional tax. I am pleased to see you do not maintain that. At least there is some hope of you understanding a little economics too.

Your view is virtually identical to Paul’s.

You would do well to retire from the field before some actual knowledge seeps into your delusions.

[JDW11235]

I’m so glad you approve! It’s hard to maintain a position I never had, and which you fabricated.

[arrogantsob]

Free trade would be the first victim of fascist economics. Fascism viewed the economy as the servant of the Volk not as a private affair. Free traders understand that it works best when left in private hands and maximizes the wealth of nations. Tariffs distort the allocation of economic resources leading to lower production than with allocations derived from Free Trade responding to the market.

Only a fool believes nations are truly isolated from each other. They are not, each is a part of a world economy and a world market. This is why trade develops as the division of labor and comparative advantage allows the creation of much more wealth than mercantilistic policies. Adam Smith figured this out over two hundred years ago but it has not been figured out by you. Drought in Russia will affect grain prices here. Floods in the US will affect grain prices in Russia. Examples of the same can be provided ad infinitum. Our economy began as part of the British Empire and dependent upon that. Hamilton developed policies which would take us away from that dependent using the tariff as a tool to help correct the distortions created by Imperial trade policies. But that was a special case not an example for a mature economy, the world's leading economy.

Look at a nation which is as close to an autarky as can be, North Korea, that policy of isolation is working out well for it, don't you think? There is little, if any, "slave" labor in China. Low wages does not mean slave labor but only a non-productive and weakly capitalized economy. Mature economies spin off jobs to the weak ones mainly because costs are too high in the former to produce many products. There are certain products which American workers will never again produce because not enough income to pay their wages can be produced. This is the result of the Export Cycle and is a good thing. Americans produce new and difficult to produce products requiring skilled labor, the Chinese produce older, standardized products which are simple to produce requiring unskilled labor. You are looking at two different labor forces capable of different things. Free trade allows that difference to work to everyone's advantage. It is the lower classes in the US which benefit most from production in China since that allows the poor to afford better clothing and goods than they could obtain with US products. We lead the world in high technology creation and agriculture as well as the creation of new goods and processes. Tariff walls help put an end to that creativity because they protect industries from competition which means they stagnate. But that is a moot point since the tariff is as dead as the Gold Standard and can never be counted on to fund anything. Look at what happens during a major war. No trade, no tariff revenue.

[arrogantsob]

Obama would go for that scheme like a crocodile for a wildebeest.

[Tolsti2]

China and NK are kinda similar. Both very protectionist, however.. China is a most favored trade country.

We don’t try to import from NK.

You can’t compare them based on that alone.

Yes, it’s political on both. China takes advantage of us sending work there. With NK, we don’t and they can’t.