Dec. 3, 2010 -- Non-farm payrolls rose by a disappointing 39,000 jobs in November as the unemployment rate edged up to 9.8 percent, the government said Friday.
November hiring rose by much less than the 150,000 jobs economists were expecting. The unemployment rate was forecast to hold steady from October's 9.6 percent, but instead it increased to 9.8 percent.
The report is more bad news about hiring at a time when big business is awash in gravy.
In the third quarter, U.S. business earned profits at a rate of $1.659 trillion a year—the highest in history, unadjusted for inflation. That's a sea change from the start of the great recession in 2008, when the bottom fell out of corporate profits and workers were pushed out the door at a record pace.
Walker Lewis, chairman and founder of Devon Value Advisors, which tells companies how to maximize their market value, says his own analysis of profits (pre-tax operating return on operating capital) shows they have doubled from 15 percent to 30 percent over the last quarter century. "It's a chart with a steady progression," he says, and the direction is up.
As for money-in-the-bank, the S&P 500's non-financial companies are presently sitting on $1 trillion in cash or cash-equivalents. The last person who saved like that for a rainy day was Noah.
But much to the chargrin of the unemployed and government policymakers, companies aren't lavishing their largess on labor.
Somewhere between 15 and 27 million people, depending on how you figure it, remain unemployed.
"Shameful," DeAnn McEwen, a member of the Council of Presidents of the California Nurses Association, calls the situation. Her members, after layoffs, are suffering: "There's just that much more work for those left behind."
Employers don't need to hire. They are aren't getting more work out of fewer people, thanks to what Daniel Pedrotty, director of the AFL-CIO's Office of Investment, calls a climate of fear: "There are five applicants for every opening. You have to work harder or your job either will be done away with or outsourced. Companies would just as soon open a factory in India as in Peoria."
Despite what he calls corporate "whining" about Washington's having an anti-business attitude, "There's never been a better time for the private sector. The Fed is keeping interest rates at record lows. Washington is telling federal employees to take a pay freeze, while doing nothing about Wall Street pay."
While CEOs award themselves "outrageous bonuses," says Pedrotty, the little man is hurting.
"Half the people out of work have been unemployed for over six months. They're burned out. They're got the makings of a permanent under-class. We all know where that leads. Our country is at a point where things are really going to get bad. But you'd never know it, to visit a corporate board room. They're sitting on cash--holding our economy hostage."
Lewis sees things differently.
"It's no big mystery," says he, why business isn't hiring: For 20 years management has been investing in technology to improve productivity. And for the last ten years, CEOs have been frustrated not to be able to shed people.
A dialog like the following, he says, has gone on between CEOs and their managers: 'Why can't we take advantage of our improved productivity and take more people out? Why can't we get rid, say, of Old Fred there?' The answer always was, 'We can't do that. Old Fred knows the customer. Old Fred holds the team together.'
"There was an aversion to risk," says Lewis, so long as it was optional to let more workers go, employers hesitated. But then came 2008.
Getting rid of people became "a necessity." Lewis says the CEOs he knows told their managers, 'Ok, look. I don't give a damn. Yes, it's a risk. It may hurt to get rid of Old Fred. But we have no choice.'"
The same CEOs, he says, were shocked to discover not only that "it didn't hurt so much to lose these people," but that later, as volume returned, companies didn't need to bring them back. They found they could get along by using temps and by discontinuing products they knew to be unprofitable.
Rather than sitting on their money, Lewis asserts, the S&P 500 have been using it judiciously, in the following proportions, to accomplish the following ends: reducing net debt (50 percent), share buybacks (10 percent), dividends (20 percent), and acquisitions (20 percent).
So when will this sea of corporate cash finally translate into hiring?
"My sense," says Lewis, "is that we're another six months away from CEOs' starting to hire. Once they see old demand come back, then they'll start worrying about new demand. They'll start bringing in new people."
Happy day! And then, after that? "Productivity goes down."