When it rains, it pours, the saying goes, and lately upbeat economic news has been falling on President Clinton like cats and dogs.
Consider, for example, the evidence of economic turnaround that came on just a single day — Friday, December 3.
For starters, the U.S. Labor Department reported that the nation’s unemployment rate plummeted four-tenths of a point in November to 6.4 percent, the biggest one-month improvement in a decade and the lowest level in nearly three years. Wall Street economists, who’d been predicting that unemployment would remain unchanged at October’s 6.8 percent rate, were wowed. “It’s a strong number right across the board,” said Joseph Liro, the chief economist of S.G. Warburg & Co. in New York City.
The good news on the jobs front came as the Commerce Department reported that its index of leading indicators, the federal government’s chief economic forecasting tool, registered its third consecutive increase in October, surging ahead by 0.5 percent after a 0.2 percent improvement in September.
Meanwhile, automakers reported a 10.4 percent gain in U.S. car and truck sales in November. Total domestic sales for the month topped 1.1 million — their highest level in three years — with General Motors Corp., Ford Motor Co., and Chrysler Corp. all reporting solid gains. Vehicle sales by Detroit’s Big Three automakers rose 11.8 percent (Chrysler posted its best November sales record since 1972), compared with a 7.6 percent increase for Japanese car companies.
And the Conference Board reported that help-wanted advertising rose across most of the nation in October — a sign that many businesses, big and small, were hiring.
What’s more, this spate of encouraging economic data came on the heels of the previous day’s diet of good news for Clinton, with the Commerce Department announcing healthy gains in October in consumer spending (up 0.8 percent) and personal income (up 0.6 percent), along with strong sales of new homes on the strength of record-low mortgage rates. The Labor Department reported a continuing decline in claims for unemployment benefits, and the price of crude oil hit a five-year low of $14.95 a barrel.
Clinton was quick to jump on the good news. “We have unemployment down, investment up, no inflation, and low interest rates,” he said. “We are moving in the right direction. “
The flip side
Maybe so, but beneath the tide of rah-rah economic news lurk some ominously fierce undertows.
The Commerce Department reported on December 1, for example, that the nation’s merchandise trade deficit (excluding military sales and gold shipments) ballooned to $36.3 billion in the third quarter of 1993 — the biggest such imbalance in nearly six years. Imports hit an all-time high, while exports fell. Chalk this bad news for U.S. companies up to bad news abroad: Japan and Europe are mired in deep economic slumps.
In Japan, corporate profits are way down, unemployment is rising, and the stock market is losing value. According to the Japan Economic Research Institute, a private think tank, the Japanese economy has actually been shrinking in real terms.
“The disappointment is pretty complete,” says Richard C. Koo, senior economist of Nomura Research Institute. “Nothing on the horizon suggests an economic recovery or recovery in corporate profits. There is nothing to look forward to.”
In Germany, the mammoth costs of reunification have triggered a national economic upheaval that’s been marked by rising unemployment and the worst recession since World War II.
“The key thing is the foreign sector,” Robert G. Dederick, the chief economist of Chicago-based Northern Trust Co., recently told a reporter for USA Today. “If Europe and Japan cannot begin to revive, then it’s going to be very difficult for us to maintain growth.”
And here at home, despite the unmistakable evidence of economic growth, more layoffs loom as corporate downsizing continues. In the first 10 months of 1993, a record 516,000 Americans — about 1,700 a day — lost their jobs. That was more than twice the rate of layoffs in 1992.
Among the blue-chip companies that slashed their payrolls last year: Boeing Co., Eastman Kodak Co., General Electric Co., General Motors Corp., International Business Machines Corp., National Gypsum Co., Procter & Gamble Co., Raytheon Co., Sears Roebuck & Co., Southwestern Bell Corp., United Air Lines Inc., Woolworth Corp., and Xerox Corp.
In October, as U.S. manufacturers saw orders jump 1.2 percent, boosted by higher demand for automobiles and aircraft, American workers were hit with
a blizzard of pink slips. A monthly tally compiled by Challenger, Gray and Christmas, Inc., a Chicago-based employment consulting firm, showed that layoffs surged 37 percent in October to an average of 3,200 a day.
“Workers at all levels, especially recent victims of mass layoffs, must be terribly confused by all the talk from economists about a growing economy while at the same time reading about an increased number of layoff announcements,” James Challenger, the firm’s president, said.
For every action . . .
Nearly every day brings a new batch of layoff announcements, many of them related to various tricks that Washington has up its sleeve.
On a single day in October, three of the nation’s leading pharmaceutical companies — American Cyanamid Co., Pfizer lnc., and Upjohn Co. — announced plans to eliminate a total of 2000 positions.
They’re getting ready for the brave new world of health-care reform; so are insurance companies. As they see it, Clinton’s plan to overhaul the nation’s health-care system is likely to depress profits and hold down growth. Aetna Life and Casualty Co., for example, pared more than 5,200 workers from its payroll last year — about a tenth of its entire work force. Cigna Corp. and others have followed suit.
Health-care reform isn’t going to help the nation’s tobacco industry, either, especially if Clinton succeeds in financing his plan partly through a 75-cent “sin tax” on a pack of cigarettes. The Tobacco Institute warns that nearly 214,000 Americans could lose their jobs as a result of such a tax. Its members would take the biggest hit, of course,but the institute also projects that the adverse side effects of the sin tax would trickle down to convenience stores and the like.
Technological advances are also driving many of the layoffs. Earlier this year, American Telephone & Telegraph Co. unveiled its 1-800-OPERATOR collect-call service, which cuts costs by using voice-recognition technology in lieu of live operators. AT&T recently announced that it expects to save about $200 million a year by using the technology to replace 3,000 to 4,000 operators.
The big squeeze
Why all the layoffs when the gross domestic product — the total of goods and services produced in the United States — was growing at an annual rate of 2.7 percent in the third quarter of 1993?
Simple. By cutting costs with a vengeance, companies of all sizes can quickly boost their profit margins — and earnings. As a result, they’ve been firing workers, closing facilities, consolidating suppliers, streamlining their distribution networks, and otherwise looking for ways to save on the wage, health-care, and pension fronts.
“If you lay off people,” as one Wall Street analyst notes, “profits go up even if you’re selling the same amount of goods.”
Many companies, in fact, are working their existing employees longer and harder to avoid paying the health-care and other increasingly expensive benefits that go along with new hires. That’s why sales per employee keep climbing at many companies and why so many chief executives chant the meaner-and-leaner mantra these days. Look at Standard & Poor’s roster of companies that have rapidly growing sales per employee — Boeing, Eastman-Kodak, IBM, Pfizer, Raytheon, and Xerox, to name just a handful — and big layoffs seem to be an uncomfortably common denominator.
So far, according to various surveys, the nation’s small businesses haven’t followed suit, even though their optimism about the economic outlook has been at a 13-year low, according to a D&B Reports survey. But how long will it be before they turn to the slash-and-churn approach of their bigger brethren?
At least one analyst — Nancy Mitchell of Citizens for a Sound Economy, a market-oriented think tank — says that tax increases enacted last year may provide a powerful nudge. “Small businesses, particularly, will be finding out what the tax bill will be early on in the year,” she says. “And I’m afraid we might see some pink slips going out. I expect a very, very sobering first quarter.”
This column originally appeared in the January/February 1994 issue of D&B Reports.
Happy Days Are Here Again — Or Are They?
When it rains, it pours, the saying goes, and lately upbeat economic news has been falling on President Clinton like cats and dogs.
Consider, for example, the evidence of economic turnaround that came on just a single day — Friday, December 3.
For starters, the U.S. Labor Department reported that the nation’s unemployment rate plummeted four-tenths of a point in November to 6.4 percent, the biggest one-month improvement in a decade and the lowest level in nearly three years. Wall Street economists, who’d been predicting that unemployment would remain unchanged at October’s 6.8 percent rate, were wowed. “It’s a strong number right across the board,” said Joseph Liro, the chief economist of S.G. Warburg & Co. in New York City.
The good news on the jobs front came as the Commerce Department reported that its index of leading indicators, the federal government’s chief economic forecasting tool, registered its third consecutive increase in October, surging ahead by 0.5 percent after a 0.2 percent improvement in September.
Meanwhile, automakers reported a 10.4 percent gain in U.S. car and truck sales in November. Total domestic sales for the month topped 1.1 million — their highest level in three years — with General Motors Corp., Ford Motor Co., and Chrysler Corp. all reporting solid gains. Vehicle sales by Detroit’s Big Three automakers rose 11.8 percent (Chrysler posted its best November sales record since 1972), compared with a 7.6 percent increase for Japanese car companies.
And the Conference Board reported that help-wanted advertising rose across most of the nation in October — a sign that many businesses, big and small, were hiring.
What’s more, this spate of encouraging economic data came on the heels of the previous day’s diet of good news for Clinton, with the Commerce Department announcing healthy gains in October in consumer spending (up 0.8 percent) and personal income (up 0.6 percent), along with strong sales of new homes on the strength of record-low mortgage rates. The Labor Department reported a continuing decline in claims for unemployment benefits, and the price of crude oil hit a five-year low of $14.95 a barrel.
Clinton was quick to jump on the good news. “We have unemployment down, investment up, no inflation, and low interest rates,” he said. “We are moving in the right direction. “
The flip side
Maybe so, but beneath the tide of rah-rah economic news lurk some ominously fierce undertows.
The Commerce Department reported on December 1, for example, that the nation’s merchandise trade deficit (excluding military sales and gold shipments) ballooned to $36.3 billion in the third quarter of 1993 — the biggest such imbalance in nearly six years. Imports hit an all-time high, while exports fell. Chalk this bad news for U.S. companies up to bad news abroad: Japan and Europe are mired in deep economic slumps.
In Japan, corporate profits are way down, unemployment is rising, and the stock market is losing value. According to the Japan Economic Research Institute, a private think tank, the Japanese economy has actually been shrinking in real terms.
“The disappointment is pretty complete,” says Richard C. Koo, senior economist of Nomura Research Institute. “Nothing on the horizon suggests an economic recovery or recovery in corporate profits. There is nothing to look forward to.”
In Germany, the mammoth costs of reunification have triggered a national economic upheaval that’s been marked by rising unemployment and the worst recession since World War II.
“The key thing is the foreign sector,” Robert G. Dederick, the chief economist of Chicago-based Northern Trust Co., recently told a reporter for USA Today. “If Europe and Japan cannot begin to revive, then it’s going to be very difficult for us to maintain growth.”
And here at home, despite the unmistakable evidence of economic growth, more layoffs loom as corporate downsizing continues. In the first 10 months of 1993, a record 516,000 Americans — about 1,700 a day — lost their jobs. That was more than twice the rate of layoffs in 1992.
Among the blue-chip companies that slashed their payrolls last year: Boeing Co., Eastman Kodak Co., General Electric Co., General Motors Corp., International Business Machines Corp., National Gypsum Co., Procter & Gamble Co., Raytheon Co., Sears Roebuck & Co., Southwestern Bell Corp., United Air Lines Inc., Woolworth Corp., and Xerox Corp.
In October, as U.S. manufacturers saw orders jump 1.2 percent, boosted by higher demand for automobiles and aircraft, American workers were hit with
a blizzard of pink slips. A monthly tally compiled by Challenger, Gray and Christmas, Inc., a Chicago-based employment consulting firm, showed that layoffs surged 37 percent in October to an average of 3,200 a day.
“Workers at all levels, especially recent victims of mass layoffs, must be terribly confused by all the talk from economists about a growing economy while at the same time reading about an increased number of layoff announcements,” James Challenger, the firm’s president, said.
For every action . . .
Nearly every day brings a new batch of layoff announcements, many of them related to various tricks that Washington has up its sleeve.
On a single day in October, three of the nation’s leading pharmaceutical companies — American Cyanamid Co., Pfizer lnc., and Upjohn Co. — announced plans to eliminate a total of 2000 positions.
They’re getting ready for the brave new world of health-care reform; so are insurance companies. As they see it, Clinton’s plan to overhaul the nation’s health-care system is likely to depress profits and hold down growth. Aetna Life and Casualty Co., for example, pared more than 5,200 workers from its payroll last year — about a tenth of its entire work force. Cigna Corp. and others have followed suit.
Health-care reform isn’t going to help the nation’s tobacco industry, either, especially if Clinton succeeds in financing his plan partly through a 75-cent “sin tax” on a pack of cigarettes. The Tobacco Institute warns that nearly 214,000 Americans could lose their jobs as a result of such a tax. Its members would take the biggest hit, of course,but the institute also projects that the adverse side effects of the sin tax would trickle down to convenience stores and the like.
Technological advances are also driving many of the layoffs. Earlier this year, American Telephone & Telegraph Co. unveiled its 1-800-OPERATOR collect-call service, which cuts costs by using voice-recognition technology in lieu of live operators. AT&T recently announced that it expects to save about $200 million a year by using the technology to replace 3,000 to 4,000 operators.
The big squeeze
Why all the layoffs when the gross domestic product — the total of goods and services produced in the United States — was growing at an annual rate of 2.7 percent in the third quarter of 1993?
Simple. By cutting costs with a vengeance, companies of all sizes can quickly boost their profit margins — and earnings. As a result, they’ve been firing workers, closing facilities, consolidating suppliers, streamlining their distribution networks, and otherwise looking for ways to save on the wage, health-care, and pension fronts.
“If you lay off people,” as one Wall Street analyst notes, “profits go up even if you’re selling the same amount of goods.”
Many companies, in fact, are working their existing employees longer and harder to avoid paying the health-care and other increasingly expensive benefits that go along with new hires. That’s why sales per employee keep climbing at many companies and why so many chief executives chant the meaner-and-leaner mantra these days. Look at Standard & Poor’s roster of companies that have rapidly growing sales per employee — Boeing, Eastman-Kodak, IBM, Pfizer, Raytheon, and Xerox, to name just a handful — and big layoffs seem to be an uncomfortably common denominator.
So far, according to various surveys, the nation’s small businesses haven’t followed suit, even though their optimism about the economic outlook has been at a 13-year low, according to a D&B Reports survey. But how long will it be before they turn to the slash-and-churn approach of their bigger brethren?
At least one analyst — Nancy Mitchell of Citizens for a Sound Economy, a market-oriented think tank — says that tax increases enacted last year may provide a powerful nudge. “Small businesses, particularly, will be finding out what the tax bill will be early on in the year,” she says. “And I’m afraid we might see some pink slips going out. I expect a very, very sobering first quarter.”
This column originally appeared in the January/February 1994 issue of D&B Reports.
D&B Reports Layoffs Unemployment