Thanks for nothing, Corporate America
quote:NEW YORK (CNNMoney.com) -- If you're a CEO of a major company you probably have a lot to be thankful for on Turkey Day. The government reported Tuesday that corporate earnings hit a record in the third quarter.
Businesses collectively posted profits of $1.67 trillion, according to the Bureau of Economic Analysis. That's up 28% from a year ago.
But this is hardly cause for celebration. The surge in profits isn't doing much to boost the economy.
Gross domestic product rose at just a 2.5% annualized clip in the third quarter. The good news is that's better than an earlier estimate of 2%. The bad news is that this level of growth is still subpar, especially coming off a series of gigantic quarterly declines in GDP in 2008 and 2009....
It will be difficult for the economy to improve in a meaningful way until there are fewer people out of work. Unemployed consumers clearly need to watch their budgets. And even people with a steady paycheck are not likely to spend a lot if they are worried about their own job security.
But companies won't feel compelled to add to their payrolls until they are confident that consumers are going to spend a lot more -- which probably won't happen until the job market improves.
So Corporate America faces the proverbial chicken vs. egg conundrum.
They can continue to cut expenses to the bone and work existing employees even harder. Hooray for productivity gains!
Or companies can start hiring more people with the hopes that more gainfully employed Americans eventually will lead to higher demand for their products and services. Good luck with that.
Companies can point to the fact that demand isn't robust enough to add more staff. According to estimates from Thomson Baseline, revenues for companies in the S&P 500 are expected to increase, on average, by 9% in 2010. But sales growth is forecast to slip to 7% next year.
"Revenue growth is still sluggish so companies think the lack of hiring is a rational response," said Peter Cohan, president of Peter S. Cohan and Associates, a venture capital and management consulting firm in Marlborough, Mass.
"Companies are going to squeeze more out of their existing work force. The pressure is on workers since unemployment is so high. People have to grin and bear it," Cohan said....
http://blog.al.com/businessnew...obs_cut_in_alab.html
More than 400 jobs cut in Alabama mute economic recovery talk
quote:"Job losses are all around us, and it dominates the entire conversation in this country right now," said Bob Allsbrook, chief economist at Birmingham-based Regions Bank. "The difference between me and many others in the debate is that I have zero confidence that the economy is gaining momentum as we speak."
So far in 2010, Alabama companies have cut about at least 5,700 jobs, according to state figures. Last year, there were at least 15,200 jobs permanently or temporarily lost that required state notification.
Business owners, Allsbrook said, simply have no confidence that investments they make in new workers today will pay off in new profits tomorrow.
"They are all telling me the same thing: They see zero reason to hire new workers right now because they have no earthly idea what demand will be going forward."
At some companies, that lack of confidence leads to job cuts....
I have been saying this all along. If demand isn't there for goods, it makes no difference how many goods you produce...so hiring more people and producing more goods is useless if they won't sell.
We have lack of demand because so many people are out of work and because the lucky ones with jobs are scared for the future and not spending.