Wall Street seemed upbeat this week thanks to a number of headlines, include positive jobs numbers in a private-sector payroll report from ADP.
Specifically, jobs increased 325,000 in December, led by the service sector and small businesses. Additionally, November's employment numbers were revised slightly higher.
But lest you think everything is coming up roses, keep in mind that many big corporations in America still are reluctant to hire. In fact, they are continuing to cut back, based on recent news.
For starters, PepsiCo is considering cutting about 4,000 jobs, according to a New York Post report. Citing inside sources, the paper also said Pepsi might be reducing pension contributions to boost its earnings, too.
Also Thursday, we learned that Kansas-based employees of Boeing will be looking for work soon. The iconic aircraft maker will be out of Wichita entirely by 2013, leaving more than 2,160 workers in the lurch. Boeing has called Kansas home since the 1920s but decided the facility no longer would allow the company to produce planes "competitively" in the current market.
While the ADP improvement is mildly encouraging and the drop in unemployment from above 9 percent to the mid-8 percent levels is nice, these mass layoffs show that the labor market still has a long way to go.
What's more, these cuts signal what likely is a disturbing trend in big corner offices beyond just Pepsi and Boeing. Aerospace workers nationwide are bracing for protracted cuts in Pentagon spending as federal budget cuts take center stage in this election year. The Boeing headline is worrying to workers at competitors like Lockheed Martin, but perhaps of greater concern is that Defense Secretary Leon Panetta is reviewing plans to trim $450 billion from the military budget over the next 10 years. Military contractors already have begun to consolidate manufacturing facilities and eliminate thousands of jobs from coast to coast in anticipation of this plan.
This is just the latest chapter from Congress in a long story of killing jobs, not creating them.
As for Pepsi, the company employs about 300,000 workers globally, so the layoff might seem small-time. But the move to cut back on benefits is very telling. Eliminating a 401(k) match would save Pepsi $75 million, according to the Post, but don't think for a second that cash is needed to keep the lights on. Pepsi is sitting on eight consecutive quarters of year-over-year revenue gains -- and is on track to see its fiscal 2011 earnings jump about 37 percent from 2008 numbers.
Pepsi isn't in dire straits. It's just squeezing employees to impress Wall Street.
I wrote recently on The Huffington Post that the ONLY thing that will fix this economy is more confidence. Folks mostly laughed me out of the room -- but these layoff announcements continue to show a defensive posturing from corporate America that simply must stop for us to make meaningful progress.
Like it or lump it, businesses cannot accept falling profits. And if they don't have confidence in their growth prospects, the only way to achieve that is to cut costs.
Some might argue these recent layoffs are just more money-grubbing tactics from the wealthiest 1 percent to boost corporate profits. Maybe, in part, they are. But let's stop being naive for a second and admit that businesses are out to make as much money as they can -- not employ as many people as they can. This is capitalism, not charity.
Pleasant jobs reports like the one from ADP this morning are nice, but workers need to read between the lines. The sad reality is that while small businesses might be hiring and more jobs in the service industry might be available, blue-chip corporations continue to slash costs and benefits to improve their profits.
Simultaneously, these big corporations are buying back their own stock at a breakneck pace to inflate numbers.
In a nutshell, businesses won't hire significantly unless they see sustainable growth. And in lieu of sustainable growth, they will settle for juicing numbers via layoffs and buybacks. The result is that even the most bullish of investors are targeting, at best, an unemployment rate of 8 percent in 2012.
Breaking this cycle is no easy task. It will take innovation, compromises on both sides and a little help from broader economic growth.
Until that happens, don't expect a big drop in unemployment any time soon.
Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace​​.com.
Follow Jeff Reeves on Twitter: www.twitter.com/JeffReevesIP
The real answer is the tightness of the employment market. If you can make the remaining workers do more with less, you will. But as soon as jobs at other companies open up, then they will start leaving.
Insurance
With all the increases in the cost of health insurance, fleet insurance, accident insurance, and so forth. It seems to me that to control these expenditures would be high on the list for cost reductions for large corporations. Given that there seems to be some sort of tax break for those expenses business might not be in a rush to address them. But the citizens that end up paying either in higher taxes or higher insurance premiums also make up businessmen and women throughout this country. Health issues, it seems to me, are by far the single most preventable expense that business has in this country. I believe that shrinking the effect that insurance and finance has on the economy is paramount in the success in the over all business climate in the US.
That would include a medicare part E ( = everyone)
Yes taxes would increase. Would the tax increase be less than a company's expenses over covering the help with less and less effective insurance. I think yes.
Good Day.... ( :
a profit to remain alive - you expected something else ?
The telling thing - you expected a different result.
Yes it is:
1) Simplify and flatten the tax code as the Obama deficit commission suggested, or better yet implement an even simpler tax code without any deductions apart from personal and dependent deductions. Our insane tax code and its byzantine interpretations amount to over 80,000 pages and require and estimated half trillion dollars in compliance costs.
2) Eliminate job killing laws raising the minimum wage. If you raise the minimum wage above the minimum productivity of young and other unskilled workers, you are killing with kindness their chances of getting a job and then developing job skills to increase their productivity.
3) Repeal Obamacare. Mandates on insurers to provide more coverage have spiked health insurance inflation from 2.5% in 2010 to 9% in 2011 with far worse to come as the government designed health insurance comes online. The very similar Romneycare program has given business the most expensive health insurance in the country, raising the cost of hiring employees.
4) Fundamentally reform the regulatory state. The bureaucracy creates an incomprehensible 150K pages of regulations. Regulators never sunset bad regulations and the Obama administration doubled the pace of adding economically significant regulations over that of Clinton and Bush.
5) Free up $1.3 trillion in investment capital by balancing the budget by reducing spending to FY 2000 levels.
1) Flatten the tax code so that the rich pay less and the poor pay more. I'm sure that would have a great impact on the demand side. Maybe if you wanted to truly flatten it (capital gains and corporations taxed at the same rate as income), I could half agree with you.
2) The productivity of minimum wage workers FAR exceeds the minimum wage. Right now, the Government is forced to subsidize low wage earners. That burden rightfully belongs on the corporations. The real problem is that so many jobs have been exported.
3) So how would you deal with the masses of uninsured? Deny them care? Single payer would be cheaper, but somehow I doubt you'd support that.
4) Our economy is in this mess largely because of the UNREGULATED greed of large banks and corporations. Your idea is to reduce what little regulation remains?
5) In the long term, a balanced budget requires a strong economy. We won't have an economic recovery if we implement austerity measures now. Of course, if we stopped the foreign wars, oil subsidies, bank bailouts, and actually started taxing large corporations, we would be fine.