Deutsche Bank noted that correlation between profitability and new hires: “Q4 corporate profits grew 32% (Q-over-Q), and 29% year-over-year.” Trends in profits tend to lead trends in hiring. The graphic shows a reversion to trend over the past two years. That should mean hiring is right around the corner.
Will increased Profits lead to Job creation?
Source: DB Global Markets Research
To illustrate this point, DB charted corporate profits per private worker. The ratio collapsed after profits peaked in Q3 1997, yet hiring kept up straight through the tech bubble. Only in Q4 2003 did corporate profits revert to trend. DB notes that at present “corporate profits per private worker, at $11,000 per employee.”
Friend and colleague Brian Reynolds notes (somewhat sardonically) that increased profits also allow companies to repay their recently refinanced debt, much of which comes due on 2007.
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Quote of the Day:
“An Economist’s guess is liable to be as good as anybody else’s.”
–Will Rogers, (1879-1935)
