Summary
-
A recovery in U.S. profits is key to Corporate America hiring again. Since the start of the year, the profitability of corporations has much improved. Nonfinancial corporate profits, a major driver of investment spending, were up 64.8% and 54.9% in Q1 and Q2, respectively.
-
The U.S. economy is experiencing very strong productivity gains, a bellwether for improved labour conditions.
-
Typically, a recovery in non-financial profits and expanding production will result in increased business investment. We expect business investment in Q3 and Q4 to be positive.
-
Historically, there is a strong relationship between investment growth and employment growth. When one rises, the other is never far behind.
-
Based on our forecast of 3% and 8% growth in investment spending for Q3 and Q4, we estimate the probability of U.S. private employment growth turning positive in Q4 2009 at 96%.
