So who wants to know why the recovering economy is not recovering as shown by the mellow unemployment recovery? All of you! Good: So here is how it works... when the economy go boom a while back companies needed to slow down also... production levels, hiring, lay offs, etc. They needed to also show some profits off of level, or declining sales. There is a way to do that, cut costs. They did this. Fast forward to today. Companies are now showing a profit, but the unemployment remains the same. This would drive up the economy in a false way. How? Easy: One thing companies did during the downturn was record impairments on goodwill, which showed up as an expense for those years. This drove down profits, as the sales were level, expenses due to impairment rose. One way they offset this was a HUGE reduction in R+D. In other words, they fired their R+D departments and decided to just float on their current products instead of develop new ones. The reason that the profits have risen which would show an increase in the economy is because on *paper* is where it happened, not in your paycheck. In other words as they stopped recognizing impairments they reduced their expenses. They also reduced their expenses by removing R+D... so they are profiting off of the same slow economy because of lower expenses and not higher sales. This is reflected in the unemployment rate remaining steady because... they arent hiring those scientists back to do R+D yet. It is a false profit because of the mix of an ending to a pattern of impairment recognition and a continued reduction in expenses. Youre welcome. -Enlightened Johnny
Posted on: Sun, 17 Nov 2013 19:35:08 +0000
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