US corporate cash hoard climbs

A majority of companies in the
Standard & Poor’s 500 stock index increased cash to a combined $1.19
trillion while simultaneously reducing spending, keeping a jobs recovery on
hold.

Caterpillar Inc., Eaton Corp.,
Walgreen Co. and General Electric Co. are among 260 companies that ended last
quarter with $522 billion more than a year earlier after cutting capital
spending by 42 percent. Economists say the dearth of investment is keeping the jobless rate
at about 10 percent as the U.S.
emerges from its worst recession since the 1930s.

“It’s not clear we are going to see
the type of growth following this recession that we’ve seen in previous recessions,”
Sandy Cutler,
Eaton’s chief executive officer, said in an interview yesterday. That view “is
leading people to be cautious as to their rate of reinvestment, and right in
parallel with that, in terms of hiring additional employees.”

Investment and hiring may remain
low as companies bring unused capacity back on line and rely on productivity
gains to fill demand, said Edward Lazear,
former economic adviser to President George W. Bush
and a professor at Stanford University in Stanford, California. Employers have
eliminated 8.4 million jobs since the U.S. slipped into recession in December
2007.

“About three years into the
recovery, you start getting significant wage growth,” Lazear said in an
interview. “It’s unfortunate because it means workers suffer for a pretty long
time after the recovery takes off.”

Congressional leaders of both
parties share a “common commitment” with President Barack Obama to promote employment
and help small businesses, Lawrence Summers,
director of the White House’s National Economic Council, said in a Feb. 9 interview
with Bloomberg Television.

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