Why Companies Won't Start Investing In Job Creation

ALL IS eerily quiet on the corporate front. Even though the global economy continues to grow strongly, and the economic recovery is nearly a year old even in America, corporate investment, and mergers and acquisitions, remain at low levels even though firms are sitting on record piles of cash.

This, in turn, is causing growing concern about whether the recovery can continue, or at least continue with much strength. As The Economist noted earlier this month, “If cautious firms pile up more savings, the prospects for recovery are poor.”

Why are firms so cautious? One likely factor is that they regard the outlook for the economy as highly uncertain, particularly in America and Europe. The recent combination of volatility and a declining trend in developed-world stockmarkets has reinforced concerns that already abounded in companies’ executive suites, that the recovery so far has relied too much on government spending. That, given all the recent political talk about the need for public austerity to fend off bond-market vigilantes, may not continue. Meanwhile, private-sector demand remains anaemic.

Continue reading at The Economist >>

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