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Thread: Top American CEOs About Job Creation: Not Happening Here

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    Default Top American CEOs About Job Creation: Not Happening Here

    from


    (snip)"CEOs of the largest American corporations, without aiming at it, shot barn-door-size holes through the rosy jobs picture. Rosy on the surface: unemployment down to 7.7% with 236,000 new jobs created last month. A picture the White House held up as proof of its success. But these CEOs didn’t see it. Not in the US. Though prospects were rosy in low-wage countries.

    Last week it was Honeywell CEO David Cote who said that they’d been cutting headcount through attrition, instead of adding to it, at the rate of hiring only two to three people as four or five leave. He expected hiring to slow even more, based on economic uncertainty in the US.

    Economic uncertainty! A term that’s now showing up frequently. But one of the things the company didn’t appear to fret about? The Sequester. With the government portion of total revenues being about 11%, the company expected only a minor dent from it in 2013. The problems were elsewhere. As a conglomerate and Fortune 100 company active in a wide variety of industries, Honeywell sees first-hand what’s going on.

    “We’ve become more concerned recently,” Cote said. “If we want employment to grow, we have to have GDP growing more like 3%, not 2% or less.” Though growth had stalled altogether last quarter, Cote hasn’t given up hope for growth this year, expecting 1.9%. Yet even 3% growth might not do much for hiring—because Honeywell has been adding plenty of jobs overseas while cutting them in the US. As the Wall Street Journal reported:

    Since 2009, Honeywell, which gets 46% of its sales from business in the US, has added 10,000 jobs globally, boosting its employee count to 132,000, while eliminating 2,000 positions in the U.S. Last year, Honeywell trimmed its US workforce by 1,000 jobs to 52,000 employees.

    It’s a point of pride: “We have 1,000 less people in finance than we did when I arrived in June of 2003,” Honeywell CFO David Anderson explained. And it even cut executives, 580 down from 600. Trimming in the US, hiring overseas.


    Honeywell isn’t the only one. But other companies are actually adding jobs in the US. The net effect is a dreary reality, best depicted by the employment-population ratio, one of the least statistically mucked-up employment metrics. It measures total jobs against the population of age 16 and older. It peaked in April 2000 at 64.7%, then trended down, collapsed during the financial crisis—and hasn’t recovered since! In February 2009, it was 60.3%. A year later, it was 58.5%. In 2011, it was 58.4%. In 2012, 58.6%. In Friday’s report for February 2013? 58.6%. Clearly, jobs have been created, but only at the rate that the working-age population has grown (for an excellent analysis of other issues in the BLS report, see The Wall Street Examiner).

    Honeywell spelled out the reasons: growth industries—and they do exist—were balanced out by corporate efforts to shave headcount and cut costs. That process is likely to continue. Because it shows up nicely on the bottom line. Honeywell has been able to increase its profit margin every year since the depth of the financial crisis and expects to make more progress in that direction. And for growth, it will focus more on the Middle East and China.

    Then an even bigger player chimed in Monday: General Electric, mega-conglomerate of superlative proportions with products ranging from locomotives and jet engines to light bulbs and medical equipment, with a massive finance division that had been bailed out during the financial crisis, and with a phenomenal sense of what’s going on in the economy.

    “The US faces more major ‘political storms’ this year,” wrote CEO Jeff Immelt in his letter to shareholders: “the fiscal situation, repeated debt-limit controversy and tax reform. We fear that this uncertainty will impact capital investment.” Again that word, uncertainty. Attached to the word fear.

    A direct jab at the theatrics in Congress and the White House about the Fiscal Cliff and the Sequester. Or the debt ceiling fight, the silliest of all controversies that has been causing people around the world to scratch their heads for two years, wondering how Congress could be insane enough to block the government from borrowing the very money that Congress told it to spend and borrow.

    Immelt wasn’t just talking about GE. He was talking about American businesses in general—and how they were reacting to this uncertainty. While housing and the consumer were improving, he wrote, “capital investment remains sluggish.” Result: the “weakest recovery since the 1930s.”

    But capital investment, a powerful driver of job creation, did happen. Massively so. OVERSEAS. So GE was confident in its growth, he said, not because of anything exciting going on in the US, but because of its activities in the developing world, particularly Africa, the Middle East, and China where GE has become a big investor. As long as that trend persists, as long as Corporate America plows its money into investments overseas to create jobs there, the job market in the US will remain a dreary affair."(snip)

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    Default Re: Top American CEOs About Job Creation: Not Happening Here

    It's pretty grim, ain't it? As soon as I get out of debt and save some money, I am investing my assets overseas. That would be my ass and my cam. Can't happen soon enough!

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    Default Re: Top American CEOs About Job Creation: Not Happening Here

    ^^^ I wouldn't worry unduly about saving up a big nest egg before expatriating. Like Cyprus, the USA is already working on an 'exit tax' / capital controls etc. that may limit the amount of your own money that can be moved outside the country in the future.

    But IMHO the much larger issue is that, thanks to 'spin' provided by US mainstream financial news media, as well as 'games' being played with official statistics ( i.e. not counting people without jobs for more than 99 weeks as unemployed, seasonal adjustments that turn losses into gains, hedonic adjustments which substitute a rising price for beef with the lower cost of substituting chicken in inflation calculations etc.), the true status of the US economy is effectively being portrayed in a far more positive light than the real / unadjusted numbers indicate.
    Last edited by Melonie; 03-28-2013 at 07:09 AM.

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    Default Re: Top American CEOs About Job Creation: Not Happening Here

    speak of the 'devil', todays PMI report received next to zero mainstream financial news coverage ... from


    (snip)"In what may be a stunning development, today the market may actually respond to an adverse piece of economic news by going lower. The news, in this case was the February Chicago PMI which tumbled from 56.8 to 52.4, the lowest since December and far below expectations of a 56.5 print - the biggest miss in 11 months.

    This was driven by a plunge in New Orders which tumbled from 60.2 to 53.0, the most since May 2011, although virtually every other components was ugly: Production posted the weakest print since September 2009, Order backlogs had its ninth month of contraction in the last year, Inventories had their 4th contraction in the last six months, Supplier Deliveries were the longest in 15 months, and so on. Ironically, only Employment was relatively normal dropping a small 0.6 from 55.7 to 55.1.

    And for those claiming there is a housing recovery, we present this excerpt from one of the respondents: "a company we buy steel from, they also pre-cut steel for new home construction, back in 2007 they shipped 110 rig packages per week, today they ship 2 rig packages per week, and for carpenters, for one employed there are 15 unemployed." Housing recovery, sure. How about unleashing the millions and millions in shadow units either entering or exiting the jammed foreclosure pipeline, where millions live mortgage free just to avoid an avalanche of selling? Let's see what recovery you have then."(snip)

    The author was premature in his call for US stock markets to actually move downward as a result of the above 'bad news'. The most plausible explanation is that to avoid future capital controls in other shaky Eurozone countries, the European rich are moving their Euros into US dollars as a safer haven ... with the primary target sector being US equities.

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    Default Re: Top American CEOs About Job Creation: Not Happening Here

    I agree with this. The only thing that will probably turn the economy around is the growth of small businesses. If most people (especially people who are unemployed) go into business for themselves by offering a product or service, the economy would greatly improve. Those in their teens right now seem very entrepreneurial-minded from what I've seen. Must be all the experimentation & advancement in technology, music, and fashion right now.

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    Default Re: Top American CEOs About Job Creation: Not Happening Here

    I think small businesses are the wave of the future. I took a class in grad school about this subject and the instructor said many jobs are moving towards that.

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    Default Re: Top American CEOs About Job Creation: Not Happening Here

    The only thing that will probably turn the economy around is the growth of small businesses. If most people (especially people who are unemployed) go into business for themselves by offering a product or service, the economy would greatly improve.
    Unfortunately, while it's seldom discussed, and with the exception of camming and a handful of other small businesses that are potentially able to access a 'global' market and customer base, must US small businesses are dependent on the discretionary incomes of potential customers who are physically located in the same geographic area as the business. And again with the exception of a handful of particular regions ( i.e. North Dakota, Texas ) with rapidly growing economies based on production of 'new wealth', in most regions thanks to stagnant economies, increasing taxes, increasing energy prices, increasing food prices etc. the levels of discretionary incomes are falling for the lower earning 90% of potential customers in said areas. And those same increasing taxes, increasing energy prices, etc. also negatively impact the potential profitability of small businesses.

    Because of this, 'conventional wisdom' would indicate that future small businesses stand the best chance of success if they ...

    - offer a product or service that is able to selectively appeal to a large number of top 10% American earners ... top 5% is even better ... top 1% better still. Over past years, it has only been this group of high earners who have experienced an actual increase in 'discretionary' income levels ( mostly due to the very high percentage of said income coming from stocks / bonds versus paychecks) .

    - locate in a region where tax rates, business regulations, energy & labor costs etc. provide the best chance for a positive net profit margin

    Unfortunately, since the majority of US locations don't have heavy concentrations of top 10% earners, and the majority of US locations are actually imposing higher tax rates, more/ more expensive regulations, etc., it is unlikely that small business formation can become a meaningful substitute for employment. It must be remembered that, with a small handful of exceptions ( vegetable gardening, cutting and splitting firewood, manufacture of niche products come to mind ), most small businesses are not capable of creating 'new wealth'. Instead they are dependent on the redistribution of wealth that has to have already been created elsewhere ...


    I took a class in grad school about this subject and the instructor said many jobs are moving towards that
    This is undoubtedly true, but probably for the 'wrong' reasons. As the CEO's arguably alluded to in the original post, these days every 'employee' of any US business large or small carries a hefty employer cost beyond that of direct labor. I'm talking about 'employer's share' of SSI taxes, employer unemployment and disability insurance premiums, potential ObamaCare costs, ongoing unemployment benefit contribution costs for 'fired' workers, potential legal and/or 'settlement' costs for 'fired' workers etc. Replacing employer / employee business transactions ( i.e. having a janitor on the payroll ) with business to business transactions ( hiring a cleaning service ) significantly reduces these costs / cost risks for the ( former ) employer, and effectively transfers costs / eliminates benefits for the small business operator. Thus while 'conversion' of an employee janitor into a small business cleaning service may come out neutral in terms of unemployment statistics, it actually comes out FAR from neutral in terms of economic impact ( i.e. higher profits for the former 'employer' and lower earnings for the newly self-employed janitor ).
    Last edited by Melonie; 03-30-2013 at 07:07 AM.

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    Default Re: Top American CEOs About Job Creation: Not Happening Here

    if there is further interest in understanding the ( mostly unpublicized ) fundamental changes in today's economy, in particular the ability to actually create 'new wealth' ( = added / surplus value ) versus reliance on the redistribution of wealth created elsewhere, you might take time to read the following treatise from our 'old friend' Charles Hughes Smith ... from


    (snip)"The Marxist class division of labor vs. capitalist/management no longer adequately describes the new economy, as knowledge workers own "the means of production" which is first and foremost knowledge. Corporations and government offer an organization within which workers can apply their knowledge (i.e. the means of production in a knowledge economy).

    Since the new economy is no longer characterized by capital vs. labor, it is a post-capitalist economy.

    Knowledge workers are a minority of the workforce; the majority are service workers, either skilled or low-skilled.

    Economist Robert B. Reich divides the workforce into similar categories: "symbolic analysts" (knowledge workers) and two classes of service workers: "routine producers" and "in-person servers."

    Since the service workers own and leverage less capital (knowledge), their ability to create surplus value and thereby demand high wages is intrinsically lower than the knowledge workers.

    This creates a structural tension, as society has to establish a way to maintain the wages of the service workers in an economy where the value and income they can generate by their labor is capped."(snip)

    (snip)"Modern capitalism can, by and large, cope with the traditional type of economic problem, for instance those dealt with by Marx, it can continue to develop production. It is in difficulties, however, when confronted with a massive resistance to its values, priorities and whole pattern of authority.

    In the traditional labor vs. capital framework, we expect the resistance to come from labor; in the knowledge economy, that resistance is arising from those who own and control the means of production, the knowledge workers themselves.

    This has important implications for corporations, non-profit organizations and government alike. In Drucker's view, "Every organization has to build in organized abandonment of everything it does. Increasingly, organizations will have to plan abandonment rather than try to prolong the life of a successful policy, practice or product."

    In other words, creative destruction is the necessary result of constant, purposeful innovation. Any organization which fails to do so will become obsolete. The same can be said of those providing the knowledge capital to the organizations, the knowledge workers.

    One consequence that none dare speak is the absolute reduction of any functional need for layers of management, or anything resembling traditional management.The Internet is a tool for eliminating management, along with generally needless/useless meetings and the other sources of unproductive friction in modern corporate and government organizations.(snip)


    Arguably, the above treatise explains the underlying post-capitalist reasons that the CEO's of the major corporations are not adding / are eliminating jobs in the USA while expanding overseas. Technology has greatly reduced the need for 'management' workers. Similarly, technology has essentially made the costs of employing US 'routine producers' ( at least in terms of overall costs versus overall production ) significantly higher than that of employing 'routine producers' in other countries. In the final analysis, America has an increasing share of workers who have extremely limited ability to create 'new wealth' = added value themselves, who are thus extremely dependent on the 'transfer of wealth' from a decreasing share of Americans who are actually capable of translating their knowledge into 'new wealth' = added value.

    The almost singular exception to these new post-capitalist economic fundamentals are 'natural resource' workers ... where instead of contributed knowledge value it is the physical extraction of additional oil, gas, minerals, etc. by 'routine producers' that is capable of 'new wealth' generation. This goes a long way to explain the economic growth taking place in North Dakota, Texas etc.
    Last edited by Melonie; 03-30-2013 at 07:56 AM.

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