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Chart of the Week: Will increased Profits lead to Job creation?

Posted By Barry Ritholtz On April 1, 2004 @ 1:34 pm In Finance | Comments Disabled

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?will_increased_profits_lead_to_jobs.bmp
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.

Random Items:
Investors worry about housing bubble [1]
Nobel Economist Praises IT Outsourcing [2]
What the Public does and does not know about Economics [3]
Google + e-mail = G-mail [4]
Electronic voting alternative offered [5]
April Fools [6]

Quote of the Day:
“An Economist’s guess is liable to be as good as anybody else’s.”
-Will Rogers [7], (1879-1935)


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2004/04/chart-of-the-week-will-increased-profits-lead-to-job-creation/

URLs in this post:

[1] Investors worry about housing bubble: http://cbs.marketwatch.com/news/story.asp?guid=%7B42555D8A%2D9545%2D4B85%2DA92E%2DC0BE465CF4AE%7D&siteid=mktw

[2] Nobel Economist Praises IT Outsourcing: http://www.technewsworld.com/perl/story/33283.html

[3] What the Public does and does not know about Economics: http://www.nytimes.com/2004/04/01/business/01scene.html?ex=1396242000&en=a8dccfd2ee2b021d&ei=5007&partner=USERLAND

[4] Google + e-mail = G-mail: http://money.cnn.com/2004/04/01/technology/google_email.reut/index.htm

[5] Electronic voting alternative offered: http://www.siliconvalley.com/mld/siliconvalley/8328014.htm

[6] April Fools : http://museumofhoaxes.com/aprilfool

[7] Will Rogers: http://www.willrogers.org/

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