{"id":3047,"date":"2010-12-29T11:03:46","date_gmt":"2010-12-29T16:03:46","guid":{"rendered":"http:\/\/timscogitorium.com\/tinblog\/?p=3047"},"modified":"2010-12-29T11:28:42","modified_gmt":"2010-12-29T16:28:42","slug":"the-demand-for-economic-demand","status":"publish","type":"post","link":"https:\/\/timscogitorium.com\/tinblog\/2010\/12\/the-demand-for-economic-demand.html","title":{"rendered":"The demand for economic demand"},"content":{"rendered":"
\"Shopping<\/a>
Idle demand results in flat job growth (Photo by Rupert Ganzer on Flickr)<\/figcaption><\/figure>\n

As the country struggles to recover economically, unemployment remains the persistent immovable peg.\u00a0 The national rate edged back up to 9.8% last month, and remains a burden on individual families as well as the economy as a whole.<\/p>\n

The mantra for politicians of all stripes has been “jobs, jobs, jobs”\u2014reflecting at least an agreement on the problem.\u00a0 The solution presents a less unified stance.\u00a0 There is no widespread agreement on how to get private industry hiring again.<\/p>\n

What is known is that private industry is collectively sitting on $2 trillion in cash.\u00a0 Further, the stock market is at its highest close since the 2008 meltdown, and all but four of the S&P 500 companies closed in the black this year.\u00a0\u00a0 Businesses have made a substantial economic recovery and even turned in record profits<\/a> in the 3rd quarter of 2010.\u00a0 So why hasn’t this resulted in more jobs?<\/p>\n

One school of thought is that businesses are not growing because demand is flat.\u00a0 There’s no point in building new widget factories or hiring new widget salespeople if there’s no one clambering to buy new widgets.<\/p>\n

The other prevailing wisdom is that businesses are hesitant to invest in new capacity because of uncertainly about the economy.\u00a0 They fear the national debt may result in new taxes, that healthcare reform will drive up their employment costs, or that onerous regulations will increase their cost of doing business.\u00a0 Being fiscally prudent, they are holding their cash in reserve, rather than investing it, in order to cover these potential future expenses.<\/p>\n

Interestingly, corporate mergers and acquisitions<\/a> are up 10% in the U.S. this year.\u00a0 This is the first uptick in this number since 2007, and reflects a desire for companies to invest their cash in something.\u00a0 Companies have also bought back $273 billion of their own shares<\/a> this year in an attempt to prop up their share prices.\u00a0 Again, indicative of a desire to use rather than horde cash.\u00a0 Additionally, U.S. companies have created 1.4 million jobs overseas<\/a> this year, while creating less than 1 million here at home.\u00a0 Many of these overseas jobs were created in growing economies with growing demand such as China and India.\u00a0 So companies are hiring, but mostly in areas where there is growing demand for their products.<\/p>\n

This should dispel any notion that U.S. companies are stockpiling cash for an uncertain economic future.\u00a0 All indications point to businesses being eager to invest and eager to grow.\u00a0 They just aren’t eager to grow in markets where demand is flat or falling.<\/p>\n

Businesses are making good business decisions, and the data show they are being rewarded for that.\u00a0 Increased focus on pro-business policies may further increase corporate profits, but show no signs of improving the plight of the American economy and the unemployed.\u00a0 We need to be careful not to undo the corporate recovery already achieved.\u00a0 But moving forward, the focus needs to be on priming the demand pump, something that additional business initiatives will not accomplish.<\/p>\n","protected":false},"excerpt":{"rendered":"

Companies are not stockpiling cash for an uncertain future. Businesses are eager to invest and grow. Just not in markets where demand is flat or falling.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[43,29],"class_list":["post-3047","post","type-post","status-publish","format-standard","hentry","category-politics","tag-economic-policy","tag-federal-regulations"],"_links":{"self":[{"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/posts\/3047","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/comments?post=3047"}],"version-history":[{"count":11,"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/posts\/3047\/revisions"}],"predecessor-version":[{"id":3049,"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/posts\/3047\/revisions\/3049"}],"wp:attachment":[{"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/media?parent=3047"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/categories?post=3047"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/timscogitorium.com\/tinblog\/wp-json\/wp\/v2\/tags?post=3047"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}