Companies Accelerate Spending as U.S. Productivity Bypasses Jobs

[Godhumor]

Source: Bloomberg

Cummins Inc. and Kohl’s Corp. are accelerating equipment purchases to boost productivity, reinforcing an unprecedented gap between capital spending and employment in the U.S. that’s restraining a labor-market rebound.

Corporate investment will rise 11 percent this year as sales pick up, following a 15 percent gain in 2010, according to “Man vs. Machine,” a Feb. 2 report from Bank of America Merrill Lynch. Employment will grow just 1.7 percent, after a 0.7 percent increase last year, the study projects.

Inventory rebuilding, low borrowing costs and government policies that include a new tax break on equipment purchases are powerful spurs for capital spending, says Neil Dutta, the Bank of America economist who wrote the report. The job market lacks such drivers and will form a “mediocre” underpinning for household spending, the biggest part of gross domestic product, he said.

“Machines have the upper hand,” Dutta said in a telephone interview from New York. “You see this huge pickup in capital spending, but there isn’t a meaningful increase in employment; it’s being grudgingly pulled along. The consumer is not going to perform the way people expect.”


Read more: http://noir.bloomberg.com/apps/news?pid=20601109&sid=ag9MyYU9KVZs&pos=10

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As some have said here, including myself, jobs will not rebound until companies reach the limit of what they can do with streamlined workforces. The productivity ration, more than any other non-economic factor, will dictate when hiring actually does hit self-sustained levels.

[fasttense]

1. I have a problem with how they figure productivity.

Where are outsourced jobs counted? How are they counted? Does putting together car parts from Japan equal the productivity of a car manufacturing plant in the US where they make their own parts?

I believe this so called productivity increase is due to sending jobs to China and not so much to improved equipment and machines.

[Godhumor]

2. Productivity specifically is how much work to a person

Things like automation increase productivity while additional hiring decreases it (The people increase in the ratio.). Companies calculate their own productivity, so it is up to them to decide specifics such as outsourcing and how it will be counted.

But, at the end of the day, what matters is when companies decide hiring more people means more money coming in than additional costs going out.

[plumbob]

4. Productivity increase is a pretty phrase for people doing more for the same

money.

We've done this for so long now that all the adult members of a household must work to afford to live.

[Godhumor]

5. It's a mathematical measure meaning pretty much that, yes

It allows companies to use things like "productivity saves" for lay-offs or reducing redundancy.

[plumbob]

8. Yet no allowance is made for the potential downsides of either layoffs

or reducing redundancy.

Unemployed folk can buy much less than employed people, for instance.

And I'm wondering if Japan isn't thinking a bit of redundancy in their power production wouldn't be a good thing about now? Never mind multiple areas of supplies for building cars.

[valerief]

10. Not the top 400 families who own most of the wealth. nt

[shraby]

3. Bottom line is...people can't buy what they can't afford on

unemployment comp. They need real jobs in order to get the economy moving.

[blackspade]

12. Which is why we need a major WPA style program to

fix the US infrastucture from the roads to fiber-optic networks.

[No Elephants]

13. Then we should have voted for FDR.

[blackspade]

14. ?

:shrug:

I wasn't aware that FDR ran in the last election. :sarcasm:
Seriously, I don't understand your reply. Please explain.

[old mark]

6. K&R- I read something last year-Company CEO stated his next new hires are now

in 6th grade. They will NOT hire anyone for possibly another 5 years or so. I expect most of those who are now without jobs will continue to be unemployed or underemployed, maybe for life.

mark

[groundloop]

7. I'm not that pessimistic. My employer is building a new plant...

Our business is looking pretty good. New plant opening later this year or early next year, probably close to 200 permanent new jobs.

[Frisbee]

9. Out of curiosity, what industry is that? eom

[Dawson Leery]

11. See this

http://www.npr.org/2010/12/05/131813014/living-without-work-the-long-term-unemployed