So, what’s so great about corporate profits if they don’t translate into American jobs? The truth is, not that much. A lot of companies say they’re waiting for the global economy’s big uncertainties to clear up before hiring: Japan, the Middle East, the eurozone crisis. And of course there are a lot of questions about how things will shake out in the U.S., which have left companies clinging to cash: healthcare reform, financial regulation, a possible double-dip recession, taxes and the budget debacle.
But there’s something much bigger going on that companies aren’t all that bothered with: jobs no longer follow growth. Until roughly a decade ago, employment and economic growth moved up roughly in lock step, a notion that became the bedrock of economic policymaking in the developed world. But globalization means all that’s changing now, which raises some very big questions on what the U.S. should do to actually get jobs moving. A new paper out by Nobel laureate Michael Spence lends some insight into this trend:
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Why Jobs, Corporate Profits, and Economic Growth Are Diverging | Business | TIME.com