Large Companies Still Not Hiring, Despite Big Profits
Martin Di Caro Reporting
The largest non-financial U.S companies in the S&P 500 have a record $837 billion in cash, according to a report in USA Today. However, those firms are not hiring workers in large numbers. Economists say the companies may not be convinced the economic crisis is over and may be holding onto their money because of uncertainty over public policy, including the future of tax rates and health care reform.
"An awful lot of it has to do with uncertainty about where the economy is going, where public policy is going, and therefore what types of financial resources they will need to prepare for and then accommodate the unknown," said economist Pat O'Keefe, the director of economic research at JH Cohn in Roseland and a former deputy assistant labor secretary in the Reagan administration.
"Tax changes are of concern because of the immediate prospects for tax policy to change between now and the end of the calendar year," O'Keefe said, referring to the coming expiration of the tax cuts passed early in the first term of George W. Bush. President Obama has indicated he would like to see the top two tax brackets return to the marginal rates of the Clinton administration. The top rate would increase from 35 percent to 39.6 percent.
"Almost irrespective of the way in which the capital accumulation is ultimately managed, we are going to face a persistently high level of unemployment," O'Keefe added. "We're talking three or four years before we get back to levels of unemployment that we saw prior to the recession, and that is assuming that we don't have any sudden surprises."
"We're coming out of a very severe recession. One of the reasons that firms are building up their balances is to rebuild their balance sheets."
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