Posts Tagged ‘economy


profits keep going up – jobs don’t.

Corporate America continues to report impressive profit gains but job creation continues to lag. Dividend increases are up sharply and the Dow Jones Industrial Average is above 12000. It makes job growth the continued missing piece of the economic rebound puzzle.

So far, earnings are up 28% from a year earlier and sales are up 7.7% for the S&P 500 firms that have reported. But the juxtaposition between profits and job growth remains a big mountain for companies hoping to keep growing their business to climb.

The other thorn in the side of the economy would be lackluster housing market, which provides a source of spending for consumers.

The lack of significant job gains 18 months after the recession was deemed “over” isn’t such a mystery when considering how companies were able to return to strong profit growth in a short period of time. Companies mainly relied on aggressive job cuts, and with companies now enjoying their resurrected earnings and demand still choppy, they are not adding to their payrolls.

To add to the fun, the price of commodities have been skyrocketing. This adds more reason to hold off on hiring. The commodities spike is pressuring profit margins and keeping companies guarded about adding to labor costs.

For the first month of 2011, the economy added a paltry 36,000 jobs, the Bureau of Labor Statistics reported Friday. Economists had expected more than 130,000 jobs. The unemployment rate fell to 9% from 9.4%, as more people found work and the pool of workers fell by more the 500,000. Winter weather that blanketed much of the country contributed to the weakness.

Some companies in hiring cycles include Enterprise Rent-A-Car, Norfolk Southern Corp., and Union Pacifiic.

But this is being offset by sectors such as banks and drug makers where jobs are still being pared. Several banks, including American Express Co. and Wells Fargo & Co., have either recently announced layoffs or signaled job cuts might be coming. Abbott Laboratories said it is trimming 1,900 jobs, or 2% of its work force.

Pfizer Inc. last week said it would slash as much as 5% of its 110,600-person global work force, including the layoff or transfer of about 1,100 employees at its Groton, Conn., facility. Pfizer plans to stop research in allergies, urology and other areas that didn’t seem as likely to bring medicines to market soon, a spokeswoman said.

Again, if jobs don’t recover it’s hard to see how the economy will be able to sustain meaningful growth.

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Slow economy bodes poorly for concerts.

One of 2010’s top performing acts, AC/DC.

With a still weak economy, revenue for the 50 biggest grossing tours in the world declined 12% to $2.93 billion, from $3.34 billion in 2009, according to Pollstar. In North America, the drop was even greater, with a 15% decline to $1.69 billion, from $1.99 billion in 2009.

The biggest grossing acts of the year were as follows:

1. Bon Jovi

2. AC/DC

3. U2

4. Lady Gaga

5. Metallica

The declines in revenue occurred despite world-wide average ticket price increases of 3.9% to $76.69, up from $73.83 in 2009. Worldwide, concert-goers bought 7% fewer tickets –  38.3 to 2009’s 45.3 million. North America ticket sales also declined.

Live Nation, the largest live entertainment company in the world, warned shareholders that operating income for the year would decrease to $405 million, from $445 million the year before.  Live Nation later lowered its guidance further to $385 million.

Despite the increase in prices, several acts had to discount tickets due to underwhelming sales.  Among the acts whose tickets were discounted were The Jonas Brothers, Rihanna, , Creed, Maroon 5 and The “American Idol” live tour 2010.


Some big names that went under in 2010

The recession creeps on and it was a tough year for some iconic brands.

A&P – East Coast grocery chain.

Affiliated Media – Newspaper publisher including the San Jose Mercury News, which I grew up reading.

Ambac – Insurer of toxic mortgage backed securities.  Maybe Ambac should have read Michael Lewis’ “The Big Short”.

American Media – Publisher of the National Enquirer among others.  Wait, Angelina Jolie, Brad Pitt and Jennifer Aniston didn’t sell magazines like they used to?  I didn’t think that story could get tired.

Blockbuster – What’s Blockbuster?  I seem to remember it having something to do with renting VHS movies.

Hummer – Giant SUV’s.

MGM – Movie studio.  Doesn’t it seem like MGM is always filing for bankruptcy, about to file for bankruptcy, should file for bankruptcy?  Well, it did.

Mercury – Part of the Ford family of cars whose most memorable model was the……………..?

Movie Gallery – Ran Hollywood Video.  See Blockbuster.

Newsweek – News magazine.  People don’t read anymore.  Well, except this blog.

Pontiac – GM car division.  It had more memorable cars than Mercury at least.

So the story would appear to be that it was a bad year for cars, print media, and movies.   Looking forward to 2011.


small business hiring doesn’t inspire confidence in a strong economic rebound

Small business in the U.S. does not seem to be hiring at too fast of a clip.  According to the Wall Street Journal, although U.S. small businesses continued to hire in November, this time adding the most jobs in a month’s time in nearly three years, according to payroll company Automatic Data Processing Inc., job growth remains modest compared with pre-recession years, and many entrepreneurs say they plan to hold back for some time to come.

Small, privately held businesses—companies with fewer than 500 employees—added a net 91,000 jobs last month, according to the ADP data released Wednesday. Though that was a sizeable jump over October’s net gain of 78,000 jobs, the average net monthly gain so far in 2010 has been just 35,000 jobs.

By contrast, small businesses in 2006 and 2007 added a monthly net average of 143,000 and 79,000 jobs, respectively, ADP’s data show.

A number of factors—including pending tax legislation, the ongoing credit crunch, and changes that owners made during the recession to stay afloat—are contributing to entrepreneurs’ restrained approach to hiring according to the Wall Street Journal.

What does this mean for consumer bankruptcy filings?  Probably more of the same. Small businesses play a major role in the U.S. economy, employing half of all private-sector workers, according to the U.S. Small Business Administration. They have also historically started adding jobs more quickly after recessions than large companies. For example, small businesses added a net monthly average of 38,000 jobs in 2003, while large businesses shed a net 22,000 jobs on average per month that year, ADP’s data show.  And the unemployment numbers are always deceiving because they do not take into account the underemployed and those who have given up looking for employment.  Add to this data the fact that the housing market still appears to be in a slum nationally and there is a recipe for continued economic hard times and more bankruptcy filings.

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