“You can’t cut your way to prosperity,” according to an old business adage.
But during the Great Recession, corporate America is sure gonna try.
Americans' confidence in the economy faded further in July, according a Conference Board survey released earlier this week, amid job worries and flat wages. But don’t tell that to Big Business, which has enjoyed a recent rally fueled by upbeat earnings reports fueled by layoffs and overseas sales. And despite improved balance sheets and robust stock prices, few companies are rehiring any of the millions of Americans they’ve laid off in the worst economic downturn since the Great Depression.
But "so far, history be damned," Samuelson wrote. "The contrast between revived profits and stunted job growth is stunning. From late 2007 to late 2009, payroll employment dropped nearly 8.4 million. Since then, the economy has recovered a scant 11% of those lost jobs. Companies are doing much better than workers; that defines today's economy." (Read more of Samuelson's thoughts on growing corporate profits and rising unemployment.)
Companies "have the wherewithal to do whatever they want -- hire; make new investments; raise dividends; do mergers and acquisitions," S&P's Howard Silverblatt told Washington Post Writer's Group columnist Robert Samuelson. "Historically, higher profits lead to higher employment," said Mark Zandi of Moody's Economy.com.
The Consumer Confidence Index registered 50.4 in July, a steeper-than-expected drop from the revised 54.3 in June, according to the Conference Board poll. The decline follows last month's decline of nearly 10 points, and is the lowest point since February. A healthy economy registers 90 or higher – but that’s a level not seen since the recession began in December 2007.
"Consumers have a much different view of the economy than the stock market does, and their views matter more to the economy," Wells Fargo economist Mark Vitner told the Associated Press.
"A rapid, sustainable recovery can't happen without the American consumer. Economists closely watch confidence because consumer spending accounts for about 70% of U.S. economic activity, and is necessary for a robust economic recovery.
"Businesses can't cost cut their way to consistent profit growth," Zandi told Samuelson. "Eventually, they need to generate revenue growth that requires investment and hiring.
"Fatter profits have shown that companies have squeezed higher productivity out of remaining workers, but that also means that "households are not benefiting," Joel Naroff, president of Naroff Economic Advisors, also told the AP. “The profit picture is "good news for Wall Street, but not good for workers."
"Consumers have a much different view of the economy than the stock market does, and their views matter more to the economy," Wells Fargo economist Mark Vitner told the Associated Press.
"A rapid, sustainable recovery can't happen without the American consumer. Economists closely watch confidence because consumer spending accounts for about 70% of U.S. economic activity, and is necessary for a robust economic recovery.
"Businesses can't cost cut their way to consistent profit growth," Zandi told Samuelson. "Eventually, they need to generate revenue growth that requires investment and hiring.
"Fatter profits have shown that companies have squeezed higher productivity out of remaining workers, but that also means that "households are not benefiting," Joel Naroff, president of Naroff Economic Advisors, also told the AP. “The profit picture is "good news for Wall Street, but not good for workers."
