Robert Reich: The Great Disconnect Between Stocks and Jobs

[tonysam]

How can the stock market hit new highs at the same time unemployment is hitting new highs? Simple. The market is up because corporate earnings are up. Corporate earnings are up because companies are cutting costs. And the biggest single cost they’re cutting is their payrolls. So they let people go and, presto, their balance sheets look better and their stock prices rise.

In the old-fashioned kind of recession decades ago, big companies laid off people with the expectation of rehiring them when the economy turned up. Then a few recessions back, companies started laying off people for good, never rehiring them even when the economy recovered.

In the Great Recession of 2008-2009, companies are going a step further. They’re using this sharp downturn to cut payrolls even below where they were when times were good. Outsourcing abroad, setting up shop in China and elsewhere, contracting out, replacing people with software and automated machines – they're doing whatever it takes to get payrolls down so earnings bounce up.

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It's another "no shit, Sherlock" analysis, but I still thought it was worth posting.

[Jackpine Radical]

1. Oh, but jobs are a trailing indicator.

Dontcha love all the handy lines they have to cover their asses while they're cannibalizing America?

The market is up because Wall Street is looting us. America is being sold for scrap value. In the end, there will be no recovery for common people.

The only way a recovery will happen is when the looters are all gone (lynchings could speed that along a bit), and the people themselves unite in co-ops to build a green and sustainable world.

[yurbud]

2. key excerpt:

Caterpillar earned $404 million in the third quarter, or 64 cents a share. Analysts had expected only 5 cents. Caterpillar’s stock is up 165 percent since March. How did Caterpillar do it? Not by selling more bulldozers. It did it by cutting over 37,000 jobs.

The result, overall, is an asset-based recovery, not a Main Street recovery. Yes, the economy is growing again, but the surge in productivity is a mirage. Worker output per hour is skyrocketing because companies are generating almost as much output with fewer workers and fewer hours.