$2,000,000,000,000 is a lot of cash.
That’s about how much America’s 500 largest NON-FINANCIAL companies have on their books. This is up about $500,000,000,000 from last year as 2010 has been very, very good for corporate profits, which are growing at a 36% pace this year and we’ll get a better insight into that this earnings season. Right now, our biggest problem is a lack of faith in the economy. As we noted last week, temp hiring is near records but real hiring is not there at all – companies are using what turnaround there is to save up for the next rainy day.
Sales are still weak but profit margins have expanded tremendously and Poor Sales is still listed as the single most important problem by 30% of the CEO’s surveyed, followed by Taxes (22%) and Regulations (13%). If poor sales to the consumer are the main problem, then what is the logic of laying off more workers and lobbying against more stimulus? As Brett Arends noted this weekend, we are hardly sliding into Socialism with Federal Spending at 25% of the economy this year vs. 23.5% under Reagan – and he didn’t have a $1Tn annual military budget (his was $200Bn and was considered out of control at the time) nor did he have a $400Bn annual interest payment on existing debt (Reagan pretty much invented modern debt – before him, we had the same debt since WWII).
Lack of consumer spending is the prime factor holding back the recovery at the moment and who can blame them. Unemployment has sidelined 22% (not a typo) of the men aged 25-65 in America. That does not count those who are working part-time or full-time at low-paying jobs – that is 18M men between 25 and 65 in the United States of America who have no jobs at all! And what does our government do about it? They cut off their unemployment benefits – as if there are 18M job openings and these guys are just lazy…
There were, in fact, 3.1M job openings in April and that was up 24% from last year so that means that “just” 14.9M American men of working age are structurally unemployed. Structural unemployment is joblessness caused not by lack of demand, but by changes in demand patterns or obsolescence of technology, and requiring retraining of workers and large investment in new capital equipment. We need to get real…
