One piece of economic data that has caught the attention of Byrnes, and others in his predicament, is a fairly staggering figure that comes out of the Bureau of Economic Analysis: Despite widespread unemployment, the BEA reports that U.S. corporations, reluctant to expand in an uncertain economy, are sitting on $1.6 trillion in cash reserves, a record amount, according to BEA economist Greg Key.
Even looking at the companies in the Standard & Poor’s 500 index of blue chips — and stripping out financials, which are required by regulators to keep large cash reserves in order to cushion against risk — the cash on hand number is still rather monstrous: $1.1 trillion. To put that in perspective, as a percentage of companies’ total market capitalization, that $1.1 trillion is more than double the ratio seen before the crisis.
“Cash is piling up faster than companies can figure out what to do with it,” said David Bianco, head of U.S. equity strategy at Bank of America.
[…] “Companies should absolutely spend some of that money to put people back to work,” Byrnes said by telephone earlier this week, clearly frustrated. “I suppose they need to make shareholders happy, but come on already.”
Actually, according to Bianco, shareholders will soon start to demand that cordoned off cash be put to work, either through some form of growth initiative or at the very least used to pay out a higher dividend. In either case, it’s not expected that the cash being hoarded will at any point translate into rapid hiring.