Monday, September 5, 2011

American Markets - Stagnant Job Growth

I thought it necessary to take a deviation from stock price analysis, as we ponder the gloomy economic news from around the world. On Friday, the U.S. reported no decrease in the unemployment rate, while Europe announced plans to move forward with another stimulus package for the struggling Greek government. Meanwhile, the Fed is contemplating a third round of quantitative easing, in an attempt to ignite the stagnant U.S. economy.

As the negative news continues, I have begun searching for reasons why U.S. companies are not investing in new employees. The vast majority of U.S. companies have experienced high earnings over the past two quarters, yet "human capital" investment has been in short supply.

In searching, I have come up with a reason for the freezing of investment in employment by U.S. companies - political uncertainty. With U.S. debt at it's highest level in U.S. history, the war in Iraq, an attempt to socialize U.S. healthcare, and crumbling Medicare and Medicaid plans, American companies have no choice but to stay as cash-laden as possible.

As we move forward, the question will become, "Can U.S. politicians make the difficult decisions necessary to foster growth in the U.S.?" Any comments encouraged.