Post by unlawflcombatnt on Mar 26, 2007 16:39:30 GMT -6
In a Bloomberg article by Joe Richter, Simon Kennedy and Rich Miller, titled Business-Spending Slowdown May Sap Job Growth, Surprising Fed, a "surprising" slowdown in business spending has been detailed.
"Business-Spending Slowdown May Sap Job Growth, Surprising Fed
By Joe Richter, Simon Kennedy and Rich Miller
March 26 (Bloomberg) -- A slowdown in business investment that the Federal Reserve expects to end without much damage to the economy may instead linger long enough to hurt job growth.
Business spending may be a significant overlooked risk to the Fed's forecast of moderate economic growth this year, economists say. When spending growth tapers off, a slowdown in hiring almost always follows, according to researchers at Commerzbank AG.
``The weakness in capital spending is alarming,'' says Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. ``If capital spending is weak and getting weaker, the next thing companies will do is slow hiring.''
Fewer new jobs would mean less consumer spending, deepening the malaise in a U.S. economy already burdened by slumping housing demand. The combination might force the Fed to shift its focus more toward shoring up growth.
Fed policy makers, led by Chairman Ben S. Bernanke, last week stuck to their view that the economy will keep expanding ``at a moderate pace.'' Their most recently published minutes, from the January meeting, indicated that while business investment had proven weaker than anticipated, they still expect improvement before year's end.
Private economists may not be so sanguine. They have cut their forecasts of business spending three times since December, and now expect it will grow this year at the slowest pace since 2003, according to surveys by Blue Chip Economic Indicators. That's after expenditures on equipment and software fell last quarter by the most in four years...."
This decline in capital spending has nothing whatsoever to do with a shortage of investment capital or liquidity. In fact, quite the opposite is true, as stated in the article.
"U.S. businesses have no shortage of funds to invest, thanks to a five-year surge in earnings that took profit margins at non- financial corporations to the highest level in 37 years in the third quarter of 2006, according to the Commerce Department."
The decline in investment spending is due to declining production demand, as well as other factors.
"Some companies would rather use their cash to purchase their own shares than invest it in new plants or expanding payrolls. Last year, non-financial companies retired a record $602.1 billion of equity through buybacks and other means, according to Fed statistics. That's up 66 percent from $363.4 billion retired in 2005.
Houston-based ConocoPhillips, the third-largest U.S. oil company, plans to quadruple share buybacks this year to $4 billion while cutting its capital budget 25 percent.
This year, profit growth is slowing as margins shrink. Analysts surveyed by Bloomberg News see per-share earnings growth among S&P 500 companies slowing to 6.8 percent this year from 16.6 percent in 2006....
``When earnings growth slows and margins narrow, American business is very quick to cut back on expenses,'' says Allen Sinai, chief global economist at New York-based Decision Economics Inc....
``Once investment spending slows, job growth tends to follow,'' says Patrick Franke, an economist at Commerzbank in Frankfurt. He says capital spending is ``decisive'' in any change in direction for the economy ``because it is closely connected with trends in the labor market.
LaVorgna says he expects monthly payroll growth to slow to an average 50,000 to 75,000 by year-end, from 189,000 in 2006, pushing the unemployment rate up to 5 percent from 4.5 percent now. A Manpower Inc. survey of 14,000 companies this month showed employers plan to slow hiring next quarter. Construction companies and makers of durable goods plan to trim hiring the most, according to Milwaukee-based Manpower, the world's second- largest provider of temporary workers....''
Poor Corporate America. Earnings are "only" growing at 6.8% per year. That must be a tough pill for all of those self-centered greedy CEOs and rich investors to swallow. I wonder how they'd feel if the were working for wages? Real wages weekly wages have increased only 1% since December 2001. Apparently that's just too fast a rate of wage growth. Corporate America will have to outsource even more jobs and hire even more illegal immigrants and foreign workers to keep those wages down and get those profits back up.
Also, what ever happened to all that increased investment that Bush's reverse Robin Hood tax cuts were supposed to produce? Oh, now I remember. That extra tax-cut money went to build production facilities in foreign countries, lobby Congress for more tax cuts, subsidies, more H1B visas, and for amnesty for all illegal immigrant workers (and especially their employers.)
I know. I'm being too hard on those poor, persecuted millionaires and billionaires, like Bill Gates. My heart truly does bleed for those unfortunate Corporatists who might have to sell one of their mansions, or several of their Lexus SUVs.
"Business-Spending Slowdown May Sap Job Growth, Surprising Fed
By Joe Richter, Simon Kennedy and Rich Miller
March 26 (Bloomberg) -- A slowdown in business investment that the Federal Reserve expects to end without much damage to the economy may instead linger long enough to hurt job growth.
Business spending may be a significant overlooked risk to the Fed's forecast of moderate economic growth this year, economists say. When spending growth tapers off, a slowdown in hiring almost always follows, according to researchers at Commerzbank AG.
``The weakness in capital spending is alarming,'' says Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. ``If capital spending is weak and getting weaker, the next thing companies will do is slow hiring.''
Fewer new jobs would mean less consumer spending, deepening the malaise in a U.S. economy already burdened by slumping housing demand. The combination might force the Fed to shift its focus more toward shoring up growth.
Fed policy makers, led by Chairman Ben S. Bernanke, last week stuck to their view that the economy will keep expanding ``at a moderate pace.'' Their most recently published minutes, from the January meeting, indicated that while business investment had proven weaker than anticipated, they still expect improvement before year's end.
Private economists may not be so sanguine. They have cut their forecasts of business spending three times since December, and now expect it will grow this year at the slowest pace since 2003, according to surveys by Blue Chip Economic Indicators. That's after expenditures on equipment and software fell last quarter by the most in four years...."
This decline in capital spending has nothing whatsoever to do with a shortage of investment capital or liquidity. In fact, quite the opposite is true, as stated in the article.
"U.S. businesses have no shortage of funds to invest, thanks to a five-year surge in earnings that took profit margins at non- financial corporations to the highest level in 37 years in the third quarter of 2006, according to the Commerce Department."
The decline in investment spending is due to declining production demand, as well as other factors.
"Some companies would rather use their cash to purchase their own shares than invest it in new plants or expanding payrolls. Last year, non-financial companies retired a record $602.1 billion of equity through buybacks and other means, according to Fed statistics. That's up 66 percent from $363.4 billion retired in 2005.
Houston-based ConocoPhillips, the third-largest U.S. oil company, plans to quadruple share buybacks this year to $4 billion while cutting its capital budget 25 percent.
This year, profit growth is slowing as margins shrink. Analysts surveyed by Bloomberg News see per-share earnings growth among S&P 500 companies slowing to 6.8 percent this year from 16.6 percent in 2006....
``When earnings growth slows and margins narrow, American business is very quick to cut back on expenses,'' says Allen Sinai, chief global economist at New York-based Decision Economics Inc....
``Once investment spending slows, job growth tends to follow,'' says Patrick Franke, an economist at Commerzbank in Frankfurt. He says capital spending is ``decisive'' in any change in direction for the economy ``because it is closely connected with trends in the labor market.
LaVorgna says he expects monthly payroll growth to slow to an average 50,000 to 75,000 by year-end, from 189,000 in 2006, pushing the unemployment rate up to 5 percent from 4.5 percent now. A Manpower Inc. survey of 14,000 companies this month showed employers plan to slow hiring next quarter. Construction companies and makers of durable goods plan to trim hiring the most, according to Milwaukee-based Manpower, the world's second- largest provider of temporary workers....''
Poor Corporate America. Earnings are "only" growing at 6.8% per year. That must be a tough pill for all of those self-centered greedy CEOs and rich investors to swallow. I wonder how they'd feel if the were working for wages? Real wages weekly wages have increased only 1% since December 2001. Apparently that's just too fast a rate of wage growth. Corporate America will have to outsource even more jobs and hire even more illegal immigrants and foreign workers to keep those wages down and get those profits back up.
Also, what ever happened to all that increased investment that Bush's reverse Robin Hood tax cuts were supposed to produce? Oh, now I remember. That extra tax-cut money went to build production facilities in foreign countries, lobby Congress for more tax cuts, subsidies, more H1B visas, and for amnesty for all illegal immigrant workers (and especially their employers.)
I know. I'm being too hard on those poor, persecuted millionaires and billionaires, like Bill Gates. My heart truly does bleed for those unfortunate Corporatists who might have to sell one of their mansions, or several of their Lexus SUVs.