As we cautioned in our recent blog post about austerity, corporate America is using their cash to reward shareholders rather than create jobs. As the public sector goes through a massive downsizing, it appears as if companies would rather reward its own than look to reduce the unemployment rate. These large Dow Jones components may be paying lip service to the media and the President on their efforts to hire some workers, but the reality of the unemployment situation lies in what they’re doing.
Home Depot announced today that they are planning to buy back $1 billion of their stock and are refinancing another $1 billion in debt. This number is in addition to their already announced buyback of $2.5 billion in stock in 2011. This is all on top of the 6% dividend increase announced earlier this year. They’re using their excess cash to reward shareholders, not hire workers. On February 15th, the company announced that they were hiring 60,000 workers (numbers that padded that month’s national jobs report). The problem: these positions are part-time, seasonal workers from March to June that support all of us that are stocking up on potting soil and finding a way to spend our tax refund.
Intel, another Dow component, made headlines in February as President Obama championed their cutting edge technology and plans to hire 4,000 new workers in 2011 as a part of his weekly radio address. The President had recently visited an Intel plant in Oregon and learned of the company’s plans to build a $5 billion facility in 2013 in Arizona. Yet again, Intel said one thing while doing another. They announced late last year that they were increasing their dividend by 15% and their board authorized the repurchase of an additional $10 billion of shares of their stock bringing the total to $14.2 billion for 2011.
In December, AT&T announced that it was increasing its dividend another 2.4%, costing the company an additional $59 million each time it pays a quarterly dividend and buying back $300 million of its shares. More recently, the company also announced a merger with T-Mobile for $39 billion. Mergers offer chances for cost-cutting (no need for two marketing departments) and usually results in job losses rather than any net employment gains.