Archive for July 29th, 2010

Corporate profits are up … jobs, not so much.

July 29, 2010

We’ve been hammering the corporate resistance to hiring for over a year.

Reich raises a couple of good points, but his ideology blinds him to the Administration’s anti-business policies and their impact on employment. 

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Excerpted from Robert Reich’s blog: The Great Decoupling of Corporate Profits from Jobs, July 26, 2010

Corporate profits are up. And big American companies are sitting on a gigantic pile of money.

So with all this money and profit, they’ll start hiring again, right? Wrong – for three reasons.

First, lots of their profits are coming from their overseas operations. So that’s where they’re investing and expanding production.

GM now sells more cars in China than it does in the US, but makes most of them there. The company now employs 32,000 hourly workers in China. But only 52,000 GM hourly workers remain in the United States – down from 468,000 in 1970.

Second, big U.S. businesses are investing their cash in labor-saving technologies. This boosts their productivity, but not their payrolls.

But due to labor-saving technologies, Ford now has half as many employees as it did a decade ago.

Wall Street analysts are happy with Ford’s “commitment to keeping capacity in check.”

“Keeping capacity in check” is the Street’s way of saying “no new hiring.” In fact, the Street is advising investors to sell the stocks of companies that talk openly of expanding capacity.

Third, corporations are using their pile of money to pay dividends to their shareholders and buy back their own stock – thereby pushing up share prices.

Last Friday, GE announced it would raise its dividend by 20 percent and reinstate its share-buyback plan. It’s GE’s first dividend increase since the company cut its dividend in early 2009. As a result, GE shares are up more than 5% in the past few days.

Bottom line: Higher corporate profits no longer lead to higher employment.  We’re witnessing a great decoupling of company profits from jobs. 

The reality is this: Big American companies may never rehire large numbers of workers.

Full article:
http://robertreich.org/post/863304269/the-great-decoupling-of-corporate-profits-from-jobs

Posted in Employment - Jobs | Leave a Comment »

Is the wine fine … or just high priced ?

July 29, 2010

Peer pressure influences us …  If everyone is telling you that something is good, you’re probably going to agree — or at least that’s what your brain will try to think.

And for adults, one of the best measures of what their peers like can be found on price tags.

Researchers tested just how much the luxurious feeling that comes with using a high-priced good determines the enjoyment of that good.

People were asked to sample and rate what they were told were five different wines. In reality, there were only three wines, each with a fake price tag — a $5 wine labeled $45, for example.

The results show that those fake prices carried a lot of weight: The participants thought they tasted five different wines, and the more “expensive” the wine, the more they liked it.

And they weren’t just lying to themselves: The researchers tested parts of the participants’ brains and found that when sipping a purportedly higher-priced wine, there was more activity in the parts that experience pleasure.

Excerpted from US News: The Fine Pleasures of Paying Through the Nose.  February 28, 2008 : 
http://money.usnews.com/money/business-economy/articles/2008/02/28/the-fine-pleasures-of-paying-through-the-nose.html

Posted in Ivory Tower to Real World, Mktg - Consumer Behavior | Leave a Comment »