HopeTracker| The Economist reports that American corporations have never had it so good, with over half of the S&P 500 reporting an average of 17% increases in profits. The Dow has again crossed 1200.
With most of the growth in profits coming from cost cutting and increased productivity in American workers afraid of losing their jobs, some analysts say the momentum can’t continue.
“Around 90% of the productivity growth in corporate America has come from cost-cutting, and that is now reaching its limit,” says Carsten Stendevad of Citigroup’s corporate-advisory arm. . .
Others disagree. “There is a lot more juice to be squeezed out of the lemon,” insists Hal Sirkin of BCG, a consultancy. Firms brag about having introduced “lean systems”, but most have done only “10-25% of what they could do”, says Mr Sirkin.
Bottom line, the Economist confirms what business media writes with consistency. The profits will be reinvested in growing markets out of America. That’s where the money is, and American workers don’t have the necessary educational and work ethic skills to support extensive business investment here.