Fourth Quarter Company Revenue Gains Are a Mirage
Earnings are another matter altogether. They are still forecast to rise over 200% among companies in the S&P 500. These earnings are largely based on cost savings. That is ironic when the nation's unemployment rate is taken into account. The portion of the corporate world that has the most access to capital -- big companies -- were still benefiting from layoffs late last year.
Fourth quarter productivity grew 6.2% according to the Labor Department after a 7.2% increase in the third quarter. Companies are wringing more work out of their employees, employees who, in turn, are worried about their future jobs prospects. Economic theory says that an increase in productivity is a sign that GDP is growing and that the companies will have to begin to hire people to handle increased sales. The Reuters data show that sales may not be increasing as much as anticipated. And, that means a surge in employment may not be just around the next corner.