Corporate Profits At Record Highs - Unemployment Is Good For Business

The latest figures from the Bureau of Economic Analysis show corporate profits at an all time high without any adjustment for inflation. The 4^th quarter of 2010 showed $1.68 trillion in profits compared to the previous high of $1.65 trillion for the 3^rd quarter of 2006.

An article titled “Corporate Profits At All-Time High As Recovery  Stumbles” by Yeepoka Yeebo March 25, 2011 and posted in The Huffington Post digs into the situation. What is clear is the concept of running lean is being taken to heart.

Running lean means that organizations are staffed at bare minimum levels yet during the uncertain economic times they are squeezing more work than ever out of their current employees. With the job market still dragging and hiring of new employees weak, employees will do more and stay where they are instead of leaving to seek another job. That is where the terms increased productivity comes in by getting the same output out of fewer employees; it is simply a math equation.

According to the article, any productivity lost during the recession has been recovered and companies are not spending cash or other liquid assets, but holding on to them. Does that mean that unemployment has been good for business, in a way yes? The recession allowed companies to make cuts in every area and almost reinvent themselves under the cover of a down business cycle.

These record profits also show how the economy has changed. Housing is still a segment in deep trouble and that was once the indicator of how well the economy was doing. A healthy housing segment meat homes were being build, purchased and other segment fed off the housing industry. What current record profits demonstrate is how profitability has disconnected with what happens in the United States. Companies like General Electric operate on a worldwide scale. Financial companies trade financial instrument on a global basis. If demand for products and services is soft in the United States it could be more than offset by growth in markets like China and India.

At some pint new employees will be need in the United States because there is a breaking point to productivity increases from current staff. The question is will the hiring be permanent, through staffing firms or even in the United States.