Tags: STA | Roberts | Profits | Hiring

STA's Roberts: Rising Corporate Profits Won't Boost Hiring

By    |   Sunday, 06 Apr 2014 06:34 PM

Those who are hoping that record U.S. corporate profits will be the key to a surge in employment should stop holding their collective breath, according to Lance Roberts, CEO of STA Wealth Management.

That’s because what really creates jobs is growth in consumption, Roberts concludes.

So long as consumption is constrained, he believes employment gains will not be as large as they otherwise might be.

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“Given that sales revenue has only grown by 4.3% a year since 2009, the aggregate demand on businesses has not been sufficient enough to expand employment dramatically,” he wrote on the company blog.

“Despite surging corporate profitability on an accrual basis, real consumer demand, as measured by what happens at the top of the income statement is what drives the need for increased employment and capital expenditures.”

According to Roberts, because American consumers are still highly leveraged, their inability to spend and borrow is holding down demand in the economy.

In fact, the current level of aggregate economic demand is simply not strong enough to offset the rising cost of taxes, benefits and healthcare – including Obamacare – associated with hiring full-time employees, Roberts said.

Therefore, the only real increases in customer demand in the U.S. is coming from population growth, he concludes.

“This leads to incremental increases in the need for waiters, airline attendants, bartenders, hospitality staff, etc. This is why the bulk of hiring continues to be primarily focused in these areas. Unfortunately, these are also the lower wage paying jobs.”

Accordingly, Roberts predicted that a surge in corporate fixed investments is unlikely to materialize anytime soon.

“With wages stagnant, social benefits comprising the largest share of disposable personal incomes on record and consumer indebtedness on the rise, there is precious little ability for ‘Main Street’ to significantly expand consumption.”

MarketWatch reported that although new government figures show the U.S. created 192,000 jobs in March, an increase in people entering the labor force kept the jobless rate flat at 6.7 percent.

Reuters reported the new unemployment figures showed the U.S. economy was resilient despite the harsh winter.

The pace of job gains should allow the Federal Reserve to continue tapering its monetary stimulus and keep overnight interest rates near zero for the time being, according to Reuters.

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Those who are hoping that record U.S. corporate profits will be the key to a surge in employment should stop holding their collective breath, according to Lance Roberts, CEO of STA Wealth Management.
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Sunday, 06 Apr 2014 06:34 PM
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