Corporate Profits Return To Prerecession Levels, But Job Growth And Investment Remain Weak

Job hunters wait to meet with a recruiter at a San Francisco job fair.

It's a good time to be an American corporate executive, but not such a great time to be a job seeker.

That's because U.S. corporate profits have returned to prerecession levels, but hiring and investment have not, according to a report by the International Institute for Labour Studies released on Friday. Corporate profits, which keep hitting all-time highs, are back to their prerecession levels of about 15 percent of gross domestic product, according to the report.

Record company profits have come at the expense of investment and hiring, according to the report. Business investment is now hovering at about 16.5 percent of GDP -- far below the prerecession average of 20 percent, according to the institute. Corporations are holding onto an "unprecedented" amount of cash because of lingering concerns about the economy's weakness, the report stated.

U.S. employers added just 115,000 jobs in April, the Labor Department reported on Friday. These additions are keeping up with the population's growth but not making up for the 11.6 million jobs lost as a result of the recession, according to economists. The labor force participation rate plunged to its lowest level since 1981: 63.6 percent.

Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, said in an interview with The Huffington Post on Friday that investment spending has been "among the slowest we've seen."

But corporate executives are in a "prisoner's dilemma," she said: Though corporations would benefit from the strengthening economy that would result if they all started investing and hiring at the same time, company officials are nervous about blazing a trail out in the open.

"It's very difficult to stand out like that and to be bold because if no one else is doing it, and you're proven wrong, you could be penalized," Bostjancic said. "If the economy does turn down, then you've over-hired, you've over-invested."

Even without hiring many more workers, companies have still managed to profit. That's because major corporations have been squeezing more out of their employees while letting their workers' inflation-adjusted wages fall. Meanwhile, worker productivity has spiked over the past few years as employees worked harder.

"Most of the productivity gains have gone to corporate America and stock prices," Bostjancic said. "The income gains are going more to corporate America and the top line than they are going to the worker."

Comments

[joelparker]

09:02 PM on 05/09/2012

Nothing better for record profits than an 8% official unemployment rate, with the real rate at 10+ %.

The corporate feudalism ruling our former democracy & morphing it into a plutocracy continues to work for the 1% with its bough government & against the 99%. When will the electorate wake up & see the the horror of corporate feudalism that's plaguing us & stop being swindled into voting against their economic best interests?

[jarednm20]

11:39 PM on 05/06/2012

Beccuase even Obama is sending jobs out of here both parties are,there is many corp paying no TAXES

[MaxHeadroom]

08:07 PM on 05/06/2012

Why should they hire here in the U.S when they can get cheaper third world or prison labor from other countries to manufacture cheap crap for consumption here?

More profit for the pigs at the trough here in the states.

[Robert SF]

05:23 PM on 05/06/2012

But corporate executives are in a "prisoner's dilemma," she said: Though corporations would benefit from the strengthening economy that would result if they all started investing and hiring at the same time
===

What a load of hooey. "Supply-side" has become the blind side of economics. If corporations started investing and hiring, all they'd have to show for it is a bunch of empty, underperforming outlets. That's because you can't keep a retail operation going if your customers are retail workers, and retail is about all that is left in the US. You need people with high salaries patronizing retail establishments, but we don't have enough high-paying jobs to patronize retail growth.

[nappyman]

04:50 PM on 05/06/2012

Corporations don't play that big a deal on jobs. Housing does. I'm buying a house now, and I am shocked to learn all the different people I have to pay. The lawyer, the inspector, the appraiser, the bank. Then you have to get insurance, utilities and furniture. Possibly some renovations. Millions of people buying homes and paying all these people. Corporations can't match that effect on the economy.

[spinotter11]

10:53 PM on 05/06/2012

I don't agree with furniture. You could live in an empty house if you could stand it. All the others I agree, they are parasites on the buying process.

[rdk70816]

10:38 AM on 05/06/2012

Corporations will once again begin to hire and grow when executives feel they can more accurately anticipate the future. That will only happen when Obama is out of office.

[nappyman]

04:46 PM on 05/06/2012

Stupid. Im sure their need to anticipate the future was real helpful in the financial meltdown.

[rdk70816]

08:45 PM on 05/06/2012

They took action during the meltdowns. One action was to stand fast. Go back to school and learn to count.

[MaxHeadroom]

08:08 PM on 05/06/2012

No, it's called pure greed on their part.

But thanks for playing at home today.

[ucche]

08:39 PM on 05/05/2012

If company's can make pre-recession level profits with less employees, then why would they hire more people. Face it people, there will just be a lot of people who will be left behind and unemployable. My father is 56 yrs old with no discernible skills and no high school diploma . He has been unemployed for 2 yrs and he can't even get a job at McDonald's. Left behind.

[George Picard]

07:48 AM on 05/06/2012

Face it liberals dont get this basic understanding, they think if you are making money you should hire more people. When in fact you only hire more people if you need more people.

[Six Mill]

08:28 AM on 05/06/2012

thats because liberals think businesses exist solely to hire people. they like to call you unpatriotic if you don't hire. they're entitlement mindset doesn't always get them what they want though. you liberal w/e/e/n/i/e/s gettin' this?

[joelparker]

09:05 PM on 05/09/2012

Always this easily duped?

Laid off employees translate immediately a better bottom line. You're looking at all those trees & cannot see that forest.

[nappyman]

04:47 PM on 05/06/2012

Sad but you might be right. My dad in the same boat. Sadly he was alot closer to retiring age.

[ztck5356]

08:12 PM on 05/05/2012

Most companies are run by Republicans. They all "dislike" Obama, putting it mildly. They want their corporate owned politicians like Bush, Cheney, Romney, all running the country again to assure their tax breaks and off shore banking. So, when a Republican goes back in the WH, the jobs will flow.

Simple as that. How's that for being held hostage, working America?

[Farmer Guy]

04:06 PM on 05/06/2012

Exactly, multinational companies purposefully forego growth and resulting profits because one of the board members is friends with romney. Its sad that Im not surprised someone would actually believe that.

The jobs will flow when obama is gone because a major unmitigated risk will be gone. I know this is not what you guys want to hear but its the truth.

[ztck5356]

04:24 PM on 05/06/2012

No, you do not want to hear the unmitigated truth. Companies HAVE foregone profits and willingly just because Obama is in the White House. They have enough "profits" from their tax breaks to ride out Obama's term. You will see that I am right when the next Republican goes in the WH. It's all about power and money and the Republicans have ALWAYS been owned by big business. You are very naive to think they would not use jobs to get their way. It's been done over and over in American history. Just read some about the "gilded" age and the "industrial age."
This is nothing new.

[IPlatotle]

03:29 PM on 05/05/2012

While there are certainly some jobs begging for lack of qualified candidates, I suspect most CEOs feel there are too many educated, overpaid workers in America and what's needed is a dumbing down of the masses along with creation of indebted desperation that will inspire Americans to work for wages low enough to compete against India and China. For such higher execs, Obama-care reflects a reversal of their goal, since it would mean fewer bankruptcies as a result of health problems. But cuts to education are now common. Wages are going down. Increasingly benefits are being lost. So we're getting there, not quite, but closer, especially if the Supreme Court once again backs fat cats to put health care down.

The time is coming when Americans will be willing to work eighty hours a week for wages that barely get them by, as was the case before the evil New Deal was implemented. It's only a matter of time before tax cut transference of wealth, from many to a few, finishes the job. Then, with people destitute and desperate, hiring will skyrocket. And the world will belong to a few, again.

[OldTulsan]

12:34 PM on 05/06/2012

Some people pay to work for free...

http://www.gmanews.tv/story/213475/oversupply-of-nurses-forces-them-to-pay-to-work-for-free
Oversupply of nurses forces them to pay to work for free - Special Reports - GMA News Online - Latest Philippine News

"...The scheme has been “rampantly practiced all over the country" for many years now, added Alvin Cloyd Dakis, national president of the Alliance of Young Nurse Leaders and Advocates International (AYNLA).

Citing statistics from the Professional Regulatory Commission, Dakis said the number of unemployed and under-employed registered Filipino nurses is estimated to range from a low of 160,000 to a high of 200,000.

“With hundreds of thousands of unemployed licensed nurses desperate for work, thousands of them went to hospitals to pay for the limited volunteer nurse slots or to train in order to gain bedside clinical experience in exchange for certificates stating that they were nurse volunteers or trainees for a specific period of time," said Dakis..."

[ThinkinPerson]

03:29 PM on 05/05/2012

One company receives $100 million in a tax break to create 'jobs.' That tax break is paid for from the worker's tax (so it doesn't go to schools, roads, hospitals) and given to the company as an incentive. So that's, 1333 jobs of $50K and benefits, or 2666 jobs at $25K and benefits.

One company, in just one U.S. state. Do you think there are any reporting requirements about how many jobs were actually created? No. Will the state come down like gang busters on a mother who lied to send her child to a school in a wealthier district. Yes. 6 years.

CAN ANY REPORTER please calculate how many of those 'Job Creation' Tax Breaks exist in our Entire Country? How much Money is taken out of Taxes and the ECONOMY to Give for JC? How many JOBS are actually CREATED? What kinds of jobs? Where might that money be better spent?

Our country HAS the $, Can pay a Salary and Benefits.

Where is the ACCOUNTABILITY for those Job Creation Programs? Where are the JOBS? WHY ARE WE GOING to take money from Schools, Hospitals, Elderly and Women for Programs that produce no jobs?

Why no reporting requirements for CORPORATE WELFARE?

[Six Mill]

08:30 AM on 05/06/2012

you're not really giving them anything. the money was always theirs. they made it and earned it.

[CZlight]

03:27 PM on 05/05/2012

Here's my take on this: Our country is now divided into 1. "Ahhhmericans"- the richest who wake up every day secure in the knowledge that every possible need or want they will ever have is already paid for and who only socialize with others in the same position and have no ability to imagine how the poor live. 2. "Mericans"- no "A" because at most now a "b" is the highest grade is the best grade available to this group, that includes all those who have have a boss, a house payment, a car payment, a tuition bill for their kids and most especially a credit card balance they are paying interest on to the "Ahhhmericans" and who will be wiped out by a health crisis. AKA "the middle class" or the "90 %". 3. Uhhhmericans- this group never bothered to learn how to spell "America" or anything else at their public school and has no plans to vote in 2012. The GOP will not help their nation succeed in it's recovery while a Democrat (of any color or sex) is in the White House. My GOP friend is a #1 and plans to leave the country if Obama is reelected. He says things will be allowed to fall apart completely and society won't be safe. I asked him where else in the world he thinks he can go that will not suffer if America crashes and he said "Canada". He means it!!

[hbssl]

03:13 PM on 05/05/2012

and you thought that mattress had foam in it

[ThinkinPerson]

03:12 PM on 05/05/2012

Since the U.S. Business Community became more of a Lobby than an actual economic engine, they appear to have lost their brains.

Are the people supposed to get their confidence up on Magic? Get to hiring people so people have money, and then, wow, see the economy turn around! (and these guys went to business school?)

The reason our economy is no longer performing as it should is because the business class have become a bunch of terrified little babies, hording money while expecting the 'workers' to sit like good little children waiting to be fed.

For all the talk about not needing government, and how the market is supposed to feel that gap, the market is actually terribly lousy at self-analysis, psychosis has set in and with their now sudden shock! and paranoia! that the working class have gotten 'mad' they run behind puppet Romney to prooooteeeeect them.

Dear Gosh, are there no economists and business people left in this country? Just cheats, liars and scared little hoarding children? Move that Bus!

Honestly, then Mitt's off talking about how there should be 500K jobs - and then, magically, the business community regains its confidence when a white man is back in office.

After everything Obama did for the business community and those raking in the cashola!???

[Bobby Whyaskin]

02:56 PM on 05/05/2012

"Though corporations would benefit from the strengthening economy that would result if they all started investing and hiring at the same time, company officials are nervous about blazing a trail out in the open."

---------------------------------------------------------------------------------------------------------------------

'You first' 'No, you first!' 'No YOU first' . 'Aw, forget it, let's just give ourselves raises.'

Much easier and beneficial just to pay themselves gazillions more and distribute more to shareholders to keep them happy, than to hire and invest in America. .

[schlinky]

02:42 PM on 05/05/2012

Trickle down eh, thats not even seeping down. And the GOPers are trying to make it even worse.Arent we lucky to have such good Patriots like the Republicans looking out for the welfare and wellbeing of the 99%.