A little more than half of the companies represented in the S&P's 500 index had recently reported their first-quarter results. 69 percent of these companies came in with profits that were better than Wall Street expected. However, only 43 percent of those same companies had revenues that were better than expected.
By JOHN CRUDELE
Last Updated: 12:28 AM, April 30, 2013
This Friday, at precisely 8:30 a.m., everyone will be asking the same question: Why aren’t companies hiring more workers?
That’s the same question America has been asking for the past six years. And the simple answer hasn’t changed: Because corporate executives don’t want to.
The reasons behind that curt answer are a lot more complex. Some data might help explain it a bit.
As of yesterday, a little more than half of the companies represented in the Standard & Poor’s 500 index had reported first-quarter results. And 69 percent of those companies came in with profits that were better than Wall Street expected, according to Thomson Reuters.
It’s normal for 63 percent of the companies to beat earnings expectations, so this was a good quarter for profits.
But here’s the catch: Only 43 percent of those same companies had revenues that were better than expected. Sixty-two percent is normal. Revenue-wise, this was a horrible quarter.
How are companies doing so well with earnings but not with revenues? Simple — the execs who run these huge S&P 500 firms are restraining spending on everything, including new workers, so that profits will remain high.
That’s not surprising, since executives own a lot of their own company’s stock and they want to make Wall Street happy about profits even while they have no control over the economy in general and their company’s revenues in particular.
The Labor Department reported an increase of just 88,000 jobs in March, which was well below acceptable levels and very disappointing to people who think they can predict these things. The experts are expecting April job growth of 150,000 on Friday.
That’s exactly what the experts had been expecting for March before being disappointed.
April’s number, however, just might be better than the previous month — but not because real jobs are being created.
April is one of the months when the Labor Department adds a very generous amount of jobs it thinks — but can’t prove — are being created by small companies that are invisible to its monthly surveys. In April 2012, for instance, the government added 206,000 of these phantom jobs that boost the statistics but do nothing for real-life employment.
Could real job growth occur in the months ahead? Last Friday, the Commerce Department reported that the nation’s gross domestic product rose by a 2.5 percent annual rate. While that’s much better than the 0.4 rate in the fourth quarter, the latest GDP figures comes with a lot of caveats.
Much of the growth in the first quarter came from consumer purchases in January. And the guessing is that growth occurred due to people taking salaries and bonuses earlier than normal because taxes were rising. So people had more money to spend in January than they normally do.
Consumer purchases tapered off in February and might have weakened more in March, which was just estimated in the GDP report.
Meanwhile, Wall Street is expecting a phenomenal increase in corporate earnings at the end of this year.
How’s that going to happen? Beats me. But executives will have to try to make Wall Street happy, and one way will be to continue not hiring new workers.
The Federal Reserve’s Open Market Committee meets today and tomorrow, and everyone is expecting the same old, same old.
Wall Street is hoping that Fed Chairman Ben Bernanke convinces everyone else that printing more money is the answer to our financial problems. That hasn’t solved anything yet, and it won’t.
But it might help the stock market continue to blow up its bubble. And it definitely will continue to rob savers and benefit Wall Street speculators.
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