Corporate profits are up, stock prices are soaring, and most banks and industries are flush with cash. So why isn't anyone hiring?
Well, it turns out they are, but they are hiring overseas where sales are surging and the pipeline of orders is fat. For example, more than half of the 15,000 people hired this year by Caterpillar were outside the U.S. This helps explain why U.S. companies are performing well (all but 4 percent of the top 500 U.S. corporations reported profits this year).
But the jobs are going elsewhere. U.S. companies are creating more jobs overseas than at home, leaving our unemployment rate at a discouraging 9.2 percent. We know that American jobs have been moving overseas for over two decades, but it used to be making clothes and toys. Now those jobs have become more sophisticated - think semiconductors and software. Companies today are getting top talent in the emerging economies. In addition, needs for these skills are growing dramatically in emerging markets like India, China and Brazil, while consumer demand in the U.S. has been subdued.
Job growth in the U.S. has effectively stopped, and wage growth as well. The fraction of the American population now working (58.2 percent) is near a 25-year low -- lower than it was when the recession officially ended in June 2009. Further, for the first time since World War II, there has been a decline in aggregate wages and salaries over the past two years. These problems are likely to persist.
Mort Zuckerman notes that throughout this fragile "recovery," more than 90 percent of the growth of output has come from increased productivity, not job creation. In fact, companies are demanding more and paying less.
Even the most successful companies in the U.S. are using the pressures of the recession to become even more productive by deploying more automation technologies, software, outsourcing and robotics. "Anything," columnist Tom Friedman notes, "they can use to make better products with reduced head count and health care and pension liabilities." They are hiring, yes, but selectively and for only the most highly qualified who can "invent, adapt and reinvent their jobs ever day," Friedman adds.
With the need to reduce our skyrocketing debt, it is unlikely that sufficient funds will be pumped into the economy, from private or government sources, to provide any kind of a boost for job creation.
More than 14 million people are now unemployed -- more idle men and women than at any time since the Great Depression. I worry that the disappearance of jobs is not cyclical, but structural, and they will not reappear.
So we have an ironic situation: American companies are flush with cash, their stocks are rising, and executive compensation is soaring. Yet they are not hiring, job creation is anemic, and the average compensation for middle Americans is actually falling.
While companies and the very wealthy may be sitting on hordes of cash, most Americans are not. The formerly well-off are now plunging into despair, many saddled with a huge debt overload. Some estimates are that the bust of the housing bubble has led to a loss of more than $14 trillion of personal wealth. In the face of this rise in personal debt and perceived loss of wealth, American workers' compensation is declining. The typical worker today actually makes less than he did in 1969 (adjusted for inflation), but he's lucky if he has a job.
We are in a vicious cycle in which job and wage losses will further reduce Americans' willingness to spend. This portends further declines in consumer spending, the primary force behind American economic growth in recent years. With corporate America reluctant to hire and consumers afraid to spend, the near-term outlook for job creation looks bleak.
Anyone have any bright ideas as to how to rectify this crisis?
• Tyrus W. Cobb is former special assistant to President Ronald Reagan.
