NEW YORK (Bloomberg) — A majority of companies in the Standard & Poor's 500 stock index increased cash to a combined $1.19 trillion while simultaneously reducing spending, keeping a jobs recovery on hold.

Caterpillar Inc., Eaton Corp., Walgreen Co., Cisco and General Electric Co. are among 260 companies that ended last quarter with $522 billion more than a year earlier after cutting capital spending by 42 percent. Economists say the dearth of investment is keeping the jobless rate at about 10 percent as the US emerges from its worst recession since the 1930s.

"It's not clear we are going to see the type of growth following this recession that we've seen in previous recessions," Sandy Cutler, Eaton's chief executive officer, said in an interview yesterday. That view "is leading people to be cautious as to their rate of reinvestment, and right in parallel with that, in terms of hiring additional employees".

Investment and hiring may remain low as companies bring unused capacity back on line and rely on productivity gains to fill demand, said Edward Lazear, former economic adviser to President George W. Bush and a professor at Stanford University in Stanford, California. Employers have eliminated 8.4 million jobs since the US slipped into recession in December 2007.

"About three years into the recovery, you start getting significant wage growth," Lazear said in an interview. "It's unfortunate because it means workers suffer for a pretty long time after the recovery takes off."

Congressional leaders of both parties share a "common commitment" with President Barack Obama to promote employment and help small businesses, Lawrence Summers, director of the White House's National Economic Council, said in a February 9 interview with Bloomberg Television.

"There's going to be a great deal of activity, and I'm optimistic there's going to be a jobs bill," Summers said.

Based on the latest quarterly reports from S&P 500 companies, the 262 companies increased cash and short-term investments by a combined 78 percent from a year earlier while reducing spending by $30.1 billion to $41.5 billion. For the entire S&P 500, cash rose about 14 percent to $2.18 trillion.

Steps companies took to accumulate cash also included lowering costs, selling shares, raising debt, crimping dividends and putting share repurchases on hold. In February 2009, GE decided to cut its quarterly dividend to 10 cents a share from 31 cents, saving about $9 billion annually. The reduction in the annual payout was the company's first since 1938.

Caterpillar is working to convince S&P and Moody's Investors Service to lift their negative credit outlooks on the maker of backhoes and bulldozers. The Peoria, Illinois-based company's cash rose 78 percent to $4.87 billion in a year as it reduced capital spending. Caterpillar has cut more than 36,000 full-time and temporary jobs since December 2008.

Walgreen plans capital spending of $1.6 billion this year, lower than $1.9 billion last year and $2.2 billion in 2008, as the biggest US drugstore chain slows the number of stores it opens, chief financial officer Wade Miquelon said at a February 8 UBS Global Healthcare Services conference.

Walgreen's cash more than tripled to $3.15 billion at the end of November from a year earlier. Miquelon said that has bolstered the Deerfield, Illinois-based company's balance sheet in a strategy that has "suited us very, very well".

A lack of investment opportunity has caused some companies to accumulate cash, Miquelon said on a call in December.

"It's not great having money in the bank earning almost no interest, but we also want to be very smart and very driven" by return on invested capital, Miquelon said then.

"Just because we're generating cash doesn't mean that we're going to feel compelled to do something that doesn't earn a good, robust return for the company and for the shareholder."

Companies may be wary of investing and hiring because of questions about government stimulus, taxes and other federal policies that impact business, Lazear said.