Friday, January 21, 2011

Cross Purpose: Creating Jobs or increasing profits?

This morning President Obama was in Schechdetty, NY at a GE facility talking jobs. President Obama has tapped General Electric Chief Executive Jeffrey Immelt to head a new White House panel tasked with finding a way to grow jobs.

In an article in December on CBS.com, they studied this issue and whether job growth is happening elsewhere. Here's the front of that article:


Corporate profits are up. Stock prices are up. So why isn't anyone hiring?

Actually, many American companies are just maybe not in your town. They're hiring overseas, where sales are surging and the pipeline of orders is fat.

More than half of the 15,000 people that Caterpillar Inc. has hired this year were outside the U.S. UPS is also hiring at a faster clip overseas. For both companies, sales in international markets are growing at least twice as fast as domestically.

The trend helps explain why unemployment remains high in the United States, edging up to 9.8 percent last month, even though companies are performing well: All but 4 percent of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.

But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute's senior international economist.

"There's a huge difference between what is good for American companies versus what is good for the American economy," says Scott.


To read the entire article, click here.

I believe that when looking at this issue one must take into account the fact that the sole purpose of corporations is to build shareholder equity (cash & other assets) and it is not to hire people to lower the unemployment rate. There is no moral directive to improve society. It's all about profits. So I am not positively disposed to think Jeff Immelt and his Business Council will do anything but figure out how the government can either lower taxes to help their profitability, or deregulate their businesses. But remember the purpose is to increase profit, not jobs. If they create some jobs that will be a side benefit, not a priority goal for business. Why do I say that? Because business is currently sitting on Trillions of dollars of cash but they are not hiring people. They are saving their cash. Until part of their purpose is to create U.S jobs with U.S. workers, the unemployment rate will remain quite high.

IF THERE IS JOB GROWTH, MOST WILL HAPPEN OVERSEES, NOT HERE IN THE US. ANY JOB GROWTH IN THE US WIL BE ONLY WHEN ABSOLUTELY NECESSARY. That's the new reality!

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