Today’s Upshot column focuses on the paradox if you will of recovering profits and stagnant hiring:
Corporate profits are humming, dividend increases are up sharply and the Dow Jones Industrial Average is back above 12000. It makes job growth the missing link as the U.S. economy mounts a rebound.
With 73% of the Standard & Poor’s 500-stock index by market value having reported fourth-quarter results, earnings are up 28% from a year earlier and sales are up 7.7%. But the contrast between profit and job growth remains a big hurdle for companies hoping to keep expanding their business.
“I am cautiously optimistic that we will see continued improvement in 2011. It’s just that it’s hard to see sustained growth until the housing market and unemployment improve,” said MasterCard Inc. Chief Executive Ajay Banga last week.
The lack of significant job gains 18 months after the recession was declared over isn’t such a mystery when considering how companies were able to return to strong profit growth in a relatively short period. They mainly relied on aggressive job cuts, and with companies now pleased with their revitalized earnings and demand still choppy, they seem to be in no hurry to add to their payrolls.
There’s no paradox, no mystery when you just accept that for a large swath of the American population, most of it in fact, there has been no appreciable recovery.
I’d like to see some kind of survey that questions whether people are better off, worse off or the same as they were in December 2007. I really would. What are you salary levels? You debt levels? Do you have the same job? Same house?
Because there hasn’t been a true recovery, except for the people at the top of the income pole, there hasn’t been a big uptick in demand here in the U.S. So companies aren’t hiring domestically, not in any great amounts in any case.