[quote=SK in CV][quote=moneymaker]Companies have laid off, paid dividends to prop up stock price, and yet are still struggling with earnings. [/quote]
For the most part, well run companies don’t have a lot of excess employees. So layoffs aren’t to increase profits, they’re done in anticipation of lower demand. (some companies over-do it, in order to increase profits, and often end up paying the price as Walmart has over the last couple years.)
But more importantly, enterprise companies aren’t struggling so much with earnings. Growth hasn’t been booming, but S&P 500 reported earnings are up almost 6-fold from 2008, up almost 100% since 2009, and are up 23% since 2010. It hasn’t been smooth sailing every quarter, but reported earnings for the 4 months this year has shown an increase over Dec ’13 of over 2.5%. On an annual basis, it would be more than an 8% increase in profits.
There are areas that are still struggling, but overall, corporate profits don’t paint a picture of a struggling economy.[/quote]
You are correct, SK. Companies have boosted profits during this recession by eonomizing on labor wherever possible. That is one reason stocks have more than doubled since their low point during the recession, and why the stock market has done so well.
Companies know they can be stingy on wage hikes and hiring because of the weak recovery. They are acting rationally. If we had had 4%/year normal growth rates in the roughly five years since the bottom of this recession instead of 2%/year growth rates, workers (employed and unemployed) would now be faring much better. Economic growth is the worker’s best friend.
