14, 8, 0, corporate growth projections
Without a computer, pen, pencil, or paper at hand, the results of a survey of major U.S. corporates were detailed on either CNBC or Bloomberg in the middle last week. So I did not record it or the source but do remember the numbers. The survey asked the respondants what their expectations were for earnings growth, capital spending growth, and hiring in the coming 12 months(not just 2013 fiscal year). The composite answers were 14% earnings growth, 8% capital spending growth, and zero new net hiring.
How can one know whether those are credible numbers or just hyperbolic answers to a phone researchers questions. Even if a stretch, the numbers given may have some directional validity, in fact probably do barring unforeseen events.
The earnings growth projection can relate both to an improving economy and to the almost universal ability of firms to use excess cash to buy back shares, boosting EPS. The capital spending projection could relate as well to an improving economy but more to the opportunities to improve efficient operations, cut costs, and improve security through technology investments. The zero net new hiring is the real eye-catcher.
In the last ten years technology has totally revamped hiring needs in many industries. Some economists suggest that on average industrial and consumer product production that, for example, may have taken 100 workers in the 1990's takes just 10 workers today. That's radical change. On the white collar side of things the Great Recession led to significant layoffs and guess what, the numbers that were laid off often were replaced by much smaller numbers as the economy has recovered. Technology again is part of the reason and bureaucratic unwinding is the other. Whatever chain of long term corporate employment loyalty that still existed was broken. The kicker to all of this is the move to using temporary employees for many tasks, not real hires.
To the extent this survey is even directionally correct, it could very well be good for the equity markets and not so healthy for our society. This outcome is not the result of some conspiracy or plot by the wealthy. It is fundamental change to the structure of our economy that must be addressed in creative ways, ways that will not happen overnight.
From this perspective, the main way out of this dilemma is to create opportunities for entreneurship with state supported enterprise zones and the cutting back of rigorous regulation designed to control the big corporates so it is not one standard fits all and does not apply to budding entrepreneurs as well. Another suggestion, the Whole Foods model could be encouraged across many areas, and by that I mean large companies sourcing from smaller ones that are just beginning to grow. Support local businesses everywhere when prices are close to competitive and service is often much better, more personal and more life fulfilling. There are many more ideas for sure, but the last one here is to pay the workers that have jobs better wages so that they can support those local businesses and spur the economy in general. Just because there is so much competition for jobs is not a good American excuse for holding down deserved wage increases. The CEO's and top executives get their gazillions. What has happened to sharing as a concept in this country?
How can one know whether those are credible numbers or just hyperbolic answers to a phone researchers questions. Even if a stretch, the numbers given may have some directional validity, in fact probably do barring unforeseen events.
The earnings growth projection can relate both to an improving economy and to the almost universal ability of firms to use excess cash to buy back shares, boosting EPS. The capital spending projection could relate as well to an improving economy but more to the opportunities to improve efficient operations, cut costs, and improve security through technology investments. The zero net new hiring is the real eye-catcher.
In the last ten years technology has totally revamped hiring needs in many industries. Some economists suggest that on average industrial and consumer product production that, for example, may have taken 100 workers in the 1990's takes just 10 workers today. That's radical change. On the white collar side of things the Great Recession led to significant layoffs and guess what, the numbers that were laid off often were replaced by much smaller numbers as the economy has recovered. Technology again is part of the reason and bureaucratic unwinding is the other. Whatever chain of long term corporate employment loyalty that still existed was broken. The kicker to all of this is the move to using temporary employees for many tasks, not real hires.
To the extent this survey is even directionally correct, it could very well be good for the equity markets and not so healthy for our society. This outcome is not the result of some conspiracy or plot by the wealthy. It is fundamental change to the structure of our economy that must be addressed in creative ways, ways that will not happen overnight.
From this perspective, the main way out of this dilemma is to create opportunities for entreneurship with state supported enterprise zones and the cutting back of rigorous regulation designed to control the big corporates so it is not one standard fits all and does not apply to budding entrepreneurs as well. Another suggestion, the Whole Foods model could be encouraged across many areas, and by that I mean large companies sourcing from smaller ones that are just beginning to grow. Support local businesses everywhere when prices are close to competitive and service is often much better, more personal and more life fulfilling. There are many more ideas for sure, but the last one here is to pay the workers that have jobs better wages so that they can support those local businesses and spur the economy in general. Just because there is so much competition for jobs is not a good American excuse for holding down deserved wage increases. The CEO's and top executives get their gazillions. What has happened to sharing as a concept in this country?
posted by John Borden at 4:08 PM
1 Comments:
You make some good points, but in the "robber baron" days when wealth in this country was so unequal, only people with lots of money could make more money and get richer. While the division of wealth today is not attractive, a shrinking middle class is not attractive, and richer and richer and more ostentatious rich class is not attractive, one must remember that today a smart person in their 20's or 30's can become a wealthy wealty person with the right idea or the right technology. The path upward is tough but it is by no means blocked.
That's better than almost any other country.
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