Issue: 219
Sent: 09-06-2010 09:42:05
In this issue:

Getting Companies to EmployA How To Book Of Self Managed Super FundsEmail Marketing WorkshopsEnduring Powers of Attorney and SMSFsEmail Marketing Business Opportunity - Helen Bairstow
Return to full article list
HomeFree weekly newsletterSelf Managed Super Fund ArticlesContact usLogin AllThingsConsidered.biz

Getting Companies to Employ

Click here to buy - A How To Book of SMSF's by Tony Negline
John Robertson

The job of companies is to increase profits not expand employment. This partly explains the delay in U.S. employment growth which is unnerving investors in the USA.

The weakness in U.S. employment growth is one of four critical issues with the capacity to derail a global recovery and cause havoc in equity markets. These are the four issues which we have been touching on in various ways in the weekly ATC email.

The 3% fall in U.S. equity markets last Friday after a disappointing employment report comes after a record breaking recovery in U.S. corporate profitability. The two charts at http://www.thebigpicture.com.au/atc/profits_employ.pdf show:

Four tendencies are evident over the 20 years spanned by these two charts.

The source of profitability does not necessarily matter for equity markets. As time goes by, however, companies must move from productivity based profit growth to profit that comes from a sustainable increase in demand. Higher demand will depend on higher employment and income growth which is linked back to business confidence and profitability.

Friday's severe market reaction to the numbers from the Bureau of Labor Statistics reflects anxiety about this connection being made. The extreme reaction was aggravated by the extraordinary expectations that had arisen about the May payroll data. On Wednesday, President Obama himself broke the long-established rule that politicians should never speculate about upcoming economic statistics. His explicit endorsement of some already overly bullish forecasts by market commentators cemented how the market would react if the statistics came in short.

Given the way business makes decisions, restoring employment early in a cyclical profit recovery was always going to be highly improbable. On this occasion, given the surrounding circumstances, business was likely to seek even more certainty than usual about the sustainability of its profit base before it commenced to hire again.

Patience might be tested but the usual and all important sequence of productivity based profits coming as a prelude to strengthening employment growth does seem to have been put in place. On that score, at least, we can take some comfort.


Share this article
Click to share this article on Facebook Click to share this article on Twitter

Previous article         Next article

 
If you liked this article and would like more by email, subscribe! It's free.

[Bold fields are required]

Your details

Your alternate email address is used only if messages to your primary email address are returned to us.

Industry

Do you work in the financial services industry?

This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.

 
 
Site design by Raycon