A post at the Wall Street Journal's Real Time Economics blog suggests that "Healthy Profit Growth Will Lead to Jobs":
Within Tuesday’s revisions to third-quarter gross domestic product — which showed real GDP grew at a 2.5% annual rate — the Bureau of Economic Analysis said last quarter’s aftertax profits increased 28.2% from a year ago. (The BEA measures earnings across the whole economy, but the growth is on par with S&P 500 companies. With 15 companies still to announce, reported third-quarter S&P 500 earnings per share are up 32% from a year ago.) The jump in profits is good news for jobseekers.
The profit upturn “will almost certainly point to a stronger pace of hiring in the quarters ahead, because every strong profits recovery in the past has given way to a noticeable pickup in hiring,” says Joseph LaVorgna, chief U.S. economist at Deutsche Bank.
Traditionally, a rebound in profits give businesses the cash and confidence to initiate new capital projects and then to add more workers. That pattern seems to be happening a bit faster this time around than in the recent past.
The reality is that there is nothing "traditional" about current circumstances. In fact, various reports indicate that those large profits stem from companies cutting payrolls to the bone and freezing or slashing spending (e.g., R&D) that is essential for creating sustainable growth (and a demand for permanent full-time workers).
Those who see things otherwise, like Mr. LaVorgna, are simply deluding themselves (again).
