Jobless Suffer With Corporate Cash Climbing to $1.19 Trillion

11 Feb

Very typical pirate behavior, hoarding the stash so that they can ride out the storm.

By Thomas Black and Will Daley

Feb. 11 (Bloomberg) — A majority of companies in the Standard & Poor’s 500 stock index increased cash to a combined $1.19 trillion while simultaneously reducing spending, keeping a jobs recovery on hold.

Caterpillar Inc., Eaton Corp., Walgreen Co. and General Electric Co. are among 260 companies that ended last quarter with $522 billion more than a year earlier after cutting capital spending by 42 percent. Economists say the dearth of investment is keeping the jobless rate at about 10 percent as the U.S. emerges from its worst recession since the 1930s.

“It’s not clear we are going to see the type of growth following this recession that we’ve seen in previous recessions,” Sandy Cutler, Eaton’s chief executive officer, said in an interview yesterday. That view “is leading people to be cautious as to their rate of reinvestment, and right in parallel with that, in terms of hiring additional employees.”

Investment and hiring may remain low as companies bring unused capacity back on line and rely on productivity gains to fill demand, said Edward Lazear, former economic adviser to President George W. Bush and a professor at Stanford University in Stanford, California. Employers have eliminated 8.4 million jobs since the U.S. slipped into recession in December 2007.

“About three years into the recovery, you start getting significant wage growth,” Lazear said in an interview. “It’s unfortunate because it means workers suffer for a pretty long time after the recovery takes off.”

Congressional leaders of both parties share a “common commitment” with President Barack Obama to promote employment and help small businesses, Lawrence Summers, director of the White House’s National Economic Council, said in a Feb. 9 interview with Bloomberg Television.

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