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 email@example.com.
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