http://www.nytimes.com/2010/07/26/business/economy/26earnings.html?_r=1&hp Intriguing article - basically that companies are seeing soaring profit margins by downsizing and they have no plans to re-hire even with increasing sales. Instead, they are holding on to the cash and benefiting shareholders.
I would love to see these companies invest in the economy but that is not their responsibility unfortunately. Harley isn't investing to be greedy, they're not investing because they don't see future sales growth. 20 years ago, the goal for american companies was to get leaner to compete with competitors from countries like japan. during this recession, I think a lot of companies have learned they can operate with a lot less manpower. this is why the pink elephant in the room is that americans have to adjust what they believe is a reasonable unemployment rate.
I am not critical of these companies at all. After all, it's the system of our economy. But wages have stagnated for the past few decades and that's an eye-opening trend. I think companies have to have an incentive to invest in the economy. With capital tax rates so low, it makes sense for companies to hold onto cash and distribute it to shareholder instead of protecting it from taxes by investing it in activities that hide profits (such as infrastructure, employees, etc). Use to be that companies used their wealth to expand and gain market share and build infrastructure. Seems like with this recover, companies are more interested in higher profit margins and getting a return to shareholders. That might be the case if shareholders pay far less capital gains taxes on their increasing stocks. Makes more sense to hold cash, let stock prices rise while the shareholder can then sell for a profit or collect dividends.
Not only this recession, but also post-dotcom bust companies saw a lot of productivity being shifted over to IT without serious replacements in the the workforce. Finance bubbles in credit and investment banks masked that discrepancy along with cheaper imports that stretched out the buying power of stagnant wages.
