Large Companies Hiring, Small Companies Not; Federal Hiring Strong, States Cutting Back; Proposed Solutions; Bright Side of Fed Policies
by ilene - November 22nd, 2010 5:45 pm
Unfortunately, after reading Mish’s article "Large Companies Hiring, Small Companies Not; Federal Hiring Strong, States Cutting Back; Proposed Solutions; Bright Side of Fed Policies," most of us are not going to be happy about what Mish calls the bright side. – Ilene
Courtesy of Mish
A recent Gallup survey suggests Larger U.S. Companies Are Hiring; Smallest Are Not
Gallup finds that larger companies are hiring more workers while the smallest businesses are shedding jobs. More than 4 in 10 employees (42%) at workplaces with at least 1,000 employees reported during the week ending Nov. 14 that their company was hiring, while 22% said their employer was letting people go. At the other extreme, 9% of workers in businesses with fewer than 10 employees said their employer was hiring, and 16% said their employer was letting people go.
This Gallup question about company size is new, so it is unclear whether this pattern is a continuation of, or a change from, the past.
Hiring Also Much Higher at the Federal Government
The federal government is hiring more employees than it is letting go, while the opposite is true for state and local governments. More than 4 in 10 federal employees (42%) say their organizations are adding people and 21% say they are letting workers go. In contrast, state and local government employees report a net loss of workers.
Pitfalls, Flaws, Observations
There are huge flaws in the survey as well as a potential for additional flaws in analyzing the survey results. Nonetheless there are some important observations that can be made.
For starters, it is nice to see large corporations hiring, but there is no indication of by how much. Is the total headcount hiring 1 or hiring 2,000? Is the number up or down from last month?
Compounding that lack of information, we have seasonal flaws. Many retailers are now ramping up hiring for the Christmas season. So… is the hiring temporary or permanent?
The survey does not say. Moreover it does not say why they are hiring. Is business expanding or is this a short-term need?
That aside, the survey is not useless by any means. If this expansion was getting stronger, the number of companies hiring would be going up. It is not. Worse yet, small businesses which are the lifeblood of job creation, have not participated in the hiring…
by ilene - September 28th, 2010 8:45 pm
Courtesy of Mish
The economy is stuck in neutral so stepping on the QE gas pedal is highly unlikely to accomplish much except increase the noise level. Yet, the philosophy at the Fed seems to be, if gas doesn’t work, give the engine more gas.
So the engine continues to rev louder and louder, and treasury yields drop, but that does not and will not put Americans back to work.
5-Year Treasury Yields at All-Time Low
Curve Watcher’s Anonymous notes Treasury Five-Year Yields Near Lowest Since 2008 Before Auction
Treasuries rose, pushing five-year note yields to the lowest level in almost two years before today’s auction, as a drop in consumer confidence spurred bets that the Federal Reserve will increase debt purchases.
Bonds also advanced as an official said the Bank of England should step up quantitative easing and Standard & Poor’s said the price of bailing out nationalized lender Anglo Irish Bank Corp. could exceed $47 billion
“The engine is revving, but the car is going nowhere,” said Thomas L. di Galoma, head of U.S. rates trading in New York at Guggenheim Capital Markets LLC, a brokerage for institutional investors. “It’s the combination of QE and a possible QE2 in England. You’ve got some sovereign-debt problems, which is also sending a safe-haven bid into Treasuries.”
Yield Curve Weekly Close
Providing unneeded liquidity may or may not help asset prices (please see Sure Thing?! for a discussion) but if quantitative easing helped the real economy, at some point yields would stop falling.
Clearly the Fed has no clue as to what to do, but it wants to "do something". The only thing the Fed can think of doing (or is willing to do) is have another round of quantitative easing, so the Fed eases whether it makes any sense or not.
The amazing thing here is talk of "Sure Things" regarding equities, with treasuries universally despised.
Of course it is no "Sure Thing" for treasury yields to drop either, but arguably it is more likely given the economic engine is stuck in neutral.
The simple fact of the matter is increased borrowing power or lower interest will not cause businesses to expand. I have discussed this point at length in
by ilene - July 27th, 2010 8:50 pm
Courtesy of Joshua M. Brown, The Reformed Broker
Burger chains are killing it, neighborhood diners are hurting. Oil & gas companies are raking it in, gas station operators are closing. Mass merchandisers have a new pep in their step, mom and pop retailers can’t afford the lease anymore.
Get the picture?
This isn’t a class warfare post, this is a reality check about the Recovery Apartheid*. Large businesses that are asset-rich are benefiting from our Sorcerer’s Apprentice-like reflation policies (buckets and buckets sloshing over with corporate welfare). Anyone dependent on actual end-customer demand? Different story. Go ask a sole proprietor doing business on the main drag of your town.
Imagine if, instead of Earnings Season for the S&P 500, we had a 4 week stretch in which we heard from a different sector of Small Business each night on a series of conference calls. Imagine, if you will, that Monday night we heard from local restaurant and catering companies throughout the nation, then on Tuesday night we heard from auto dealerships, Wednesday night was machine repair shops, Thursday was real estate agencies, etc.
With my hypothetical Small Business Earnings Season in mind, I ask you the following…would the stock market have just posted an almost 4% gain since July 13th had that have been the case? Would anything said by a majority of America’s business owners on conference calls each night even come close to matching…
by ilene - July 26th, 2010 7:30 pm
Courtesy of Mish
Like most politicians, Treasury Secretary Tim Geithner likes to talk out of both sides of his mouth, generally saying contradictory things in sound bites that may sound reasonable at first glance, but look idiotic upon closer inspection.
For example please consider Private sector must drive economy: Geithner
During an interview on NBC’s "Meet the Press," Geithner also said the government has big plans for reforming Fannie Mae and Freddie Mac, the housing finance giants that now stand behind most of the mortgages in the U.S. after being bailed out by taxpayers during the 2008 financial crisis.
Geithner said Sunday that he doesn’t expect a double-dip recession, citing encouraging signs in the economy. "The most likely thing is you see an economy that gradually strengthens over the next year or two," he said. Watch Geithner on Meet the Press.
Businesses are still "very cautious" and are trying to get as much productivity from current employees as possible, Geithner explained.
"They are in a very strong financial condition though. I think that’s very promising because there’s a lot of pent-up demand and there’s a lot of capacity still for them to step up and start to invest and hire again," he added. "The government can help but we need to make this transition now to a recovery led by private investment."
There’s a "good case" for the government to support small businesses, the unemployed and help states keep teachers in classrooms, but the transition to growth led by the private sector must happen, Geithner said.
Still, he stressed that the current system of housing finance has to change.
"We’re not going to preserve Fannie and Freddie in anything like their current form. We’re going to have to bring fundamental change to that market," Geithner said.
There’s still a good case for the government preserving some type of guarantee to make sure that people can finance a house even in a very damaging recession, he explained.
"We’re also going to have to take a look at the broad set of policies we put in place to help encourage home ownership and particularly help low income Americans get access to affordable housing," Geithner said. "We’re going to take a very broad look at how best to do that."
No Pent Up Demand
by ilene - July 14th, 2010 4:50 pm
Courtesy of Mish
Today the Census Bureau posted its Advance Monthly Retail Sales and Food Services Report for June 2010.
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $360.2 billion, a decrease of 0.5 percent from the previous month, but 4.8 percent above June 2009.
Total sales for the April through June 2010 period were up 6.8 percent from the same period a year ago. The April to May 2010 percent change was revised from -1.2 percent to -1.1 percent.
Retail trade sales were down 0.6 percent from May 2010, but 5.0 percent above last year. Nonstore retailers sales were up 12.1 percent from June 2009 and gasoline stations sales were up 8.8 percent from last year.
The only believable number in the report is gasoline sales. Otherwise the problem is in Census Bureau methodology.
The advance estimates are based on a subsample of the Census Bureau’s full retail and food services sample. A stratified random sampling method is used to select approximately 5,000 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million retail and food services firms. Responding firms account for approximately 65% of the MARTS dollar volume estimate.
The methodology misses stores that went out of business and have no retail sales. Circuit City is a prime example but also note that thousands of small strip mall stores are now shuttered as well. Some of that volume went to the surveyed stores making it appear sales went up.
The only accurate way of computing retail sales is to look at state sales tax data. Even then, tax data can be misleading because one needs to factor in changes in tax policy, notably states increasing sales tax rates.
For example, a rise in the sales tax rate from 7% to 8% would result in a 14% increase in sales tax collections (all other things being equal).
The Rockefeller Institute reports "The growth in state tax revenues is not an indication of broad state fiscal recovery, but is mostly driven by legislated changes [massive tax increases] in two states — California and New York."
Please see Rockefeller…
by ilene - July 12th, 2010 10:46 pm
Courtesy of James Howard Kunstler
On a hot Saturday in mid-July in my corner of the country, when everyone else is cavorting on Million Dollar Beach at Lake George, or plying the aisles of the home Depot, or riding their motorcycles in faux-outlaw hordes, I like to slip away to the neglected places where nobody goes. I seek out the places of industrial ruin – there are many around here in the upper Hudson Valley, and they are mostly right along the river itself, because there are many spots where the water tumbles and falls in a way that human beings could capture that power and direct it to useful work.
I always bring my French easel, a wooden contraption ingeniously designed to fold up into a box, to which I have bolted on backpack straps. To me, these ruins of America’s industrial past are as compelling as the ruins of ancient Rome were to Thomas Cole and his painter-contemporaries, who took refuge in history at the exact moment that their own new nation began racing into its industrial future.
I’ve been haunting this particular site in Hudson Falls, New York, all summer so far. Originally called Bakers Falls, it evolved over a hundred-odd years into an extremely complex set of dams, spillways, intakes, revetments, channels, gangways, and hydroelectric bric-a-brac all worked into the crumbly shale that forms the original cliff. From a vantage on the west side of the river, you can clearly read the layered history of industry as though it was a section of sedimentary rock from the Mesozoic.
One thing above all amazes me about these American industrial ruins: they’re not really very old. My grandfather was already reading law and drinking beer when some of this stuff was brand-new (or not even here yet!). Unlike Rome’s long, dawdling descent from greatness, America’s industrial fall seems to have happened in the space of a handclap. I suppose it was in the nature of the fossil fuel fiesta that these activities could only last as long as the basic energy resource was so cheap you hardly needed to figure it into the cost of doing business. Which is not to say that the human element didn’t change, too, since obviously it did – as America went…
by ilene - July 6th, 2010 7:37 pm
Courtesy of Karl Denninger of The Market Ticker
How many times have you heard that: "Corporations are flush with cash; they have record amounts of free cash on their balance sheets"?
It’s touted as a positive thing.
Corporations hoard cash when they are convinced that things are going to get bad. No corporation hoards cash if it has somewhere better to deploy it - that is, somewhere it is convinced it can invest and produce a return for the business.
So what does a "record level of cash" tell us about business prospects? Simple: Business sucks today and forward prospects are deteriorating, not improving.
Simply put, businesses not only fear the need for all that cash, they have no compelling places to invest in the growth of the company’s revenues and profits. They can’t make the argument for expanding their plant, hiring, an M&A deal or even a stock buyback. They expect a hard rain or worse, an outbreak of tornadoes, not smooth sailing and fair skies.
Don’t be suckered by the mainstream media.
by ilene - May 29th, 2010 1:15 pm
Courtesy of Mish
The Federal Reserve Bank of Atlanta Asks How "Discouraged" are Small Businesses? Here are some Insights from an Atlanta Fed small business lending survey.
Roughly half of U.S. workers are employed at firms with fewer than 500 employees, and about 90 percent of U.S. firms have fewer than 20 employees. While estimates vary, small businesses are also credited with creating the lion’s share of net new jobs. Small businesses are, in total, a big deal.
Many people have noted the decline in small business lending during the recession, and some have suggested proposals to give incentives to banks to increase their small business portfolios. But is a lack of willingness to lend to small businesses really what’s behind the decline in small business lending? Or is it the lack of creditworthy demand resulting from the effects of the recession and housing market distress?
We at the Federal Reserve Bank of Atlanta have also noted the paucity of data in this area and have begun a series of small business credit surveys. Leveraging the contacts in our Regional Economic Information Network (REIN), we polled 311 small businesses in the states of the Sixth District (Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee) on their credit experiences and future plans. While the survey is not a stratified random sample and so should not be viewed as a statistical representation of small business firms in the Sixth District, we believe the results are informative.
Indeed, the results of our April 2010 survey suggest that demand-side factors may be the driving force behind lower levels of small business credit. To be sure, when asked about the recent obstacles to accessing credit, some firms (34 firms, or 11 percent of our sample) cited banks’ unwillingness to lend, but many more firms cited factors that may reflect low credit quality on the part of prospective borrowers. For example, 32 percent of firms cited a decline in sales over the past two years as an obstacle, 19 percent cited a high level of outstanding business or personal debt, 10 percent cited a less than stellar credit score, and 112 firms (32 percent) report no recent obstacles to credit.
Perhaps not surprisingly, outside of the troubled construction and real estate industries, close to half the firms polled (46 percent) do not believe there