The Great Disconnect Between Stocks and Jobs

[Crewleader]

by Robert Reich

Wednesday, November 18, 2009

The Great Disconnect Between Stocks and Jobs

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.

http://robertreich.blogspot.com/2009/11/great-disconnect-between-stocks-and.html?ref=patrick.net

[TwilightGardener]

1. I agree with this--stock goes up for companies when they shed jobs, it seems.

And in a bad economy, they can extract the last bits of pulp from the weary workers who are left, because they know those employees are terrified of getting canned too--what are they going to do, quit and find something better? LOL.

[geckosfeet]

2. This does not paint a rosey picture.

[midnight]

3. I think this tool is being used to further slavery across the world.

[clixtox]

5. It is working like a charm in the USA now too!!! Can you feel it? N/T

[Vinnie From Indy]

4. Good column from Reich

People have been discussing this very issue here at DU for years. Welcome to the party Robert Reich!