By Shobhana Chandra and Steve Matthews Bloomberg News
WASHINGTON - Weakening demand is forcing new and accelerated cost reductions at companies from Bank of America Corp. and Hewlett-Packard Co. to Staples Inc. and Eastman Kodak Co., dimming the outlook for an already struggling U.S. labor market.
Even as consumer confidence and housing show signs of recovering, sales for businesses in the Standard & Poor’s 500 Index fell 0.9 percent from a year earlier in July through September, the second consecutive quarterly drop and biggest decline since 2009, according to analyst forecasts compiled by Bloomberg. A 1.2 percent gain projected for October-December still is smaller than the 5.4 percent rise in this year’s first three months.
A global slowdown triggered by Europe’s debt crisis is exacerbated by the potential impact of the impending U.S. fiscal cliff of changes in taxes and government spending. All this is pushing finance chiefs back to the drawing board, with some limiting hiring and investment and others slashing more jobs than originally announced. Such belt-tightening will dominate employment prospects for the rest of the year.
“These cost controls are one of the key reasons job growth remains relatively weak,” said Charles Lieberman, chief investment officer at Advisors Capital Management LLC in Hasbrouck Heights, New Jersey, and former head of monetary analysis at the Federal Reserve Bank of New York. Companies will avoid hiring until orders have strengthened and “they cannot meet demand with their existing workforce.”
Partly because of the retrenching, companies in the S&P 500, excluding financial institutions and utilities, held near- record cash totaling $1.01 trillion in the first three months of 2012, S&P data show.
And even with the fragile labor market, the world’s largest economy is expanding. Gross domestic product has grown in each quarter since June 2009, when the worst recession since the Great Depression ended. Growth is weakening, however, with the second-quarter annual pace of 1.3 percent missing a prior estimate of 1.7 percent and below the first quarter’s 2 percent.
Payrolls, after slowing in five of the first eight months this year, rose 115,000 in September following a less-than- forecast 96,000 gain in August, according to the median estimate of economists surveyed by Bloomberg ahead of a Labor Department report due Oct. 5. Private employers added 130,000 workers, they predicted, and the jobless rate rose to 8.2 percent from 8.1 percent in August. That would mark the 44th consecutive month exceeding 8 percent, the longest streak in records since 1948.
“It’s just going to be a long, hard slog,” said Joshua Shapiro, the top-ranked forecaster of the U.S. economy for three consecutive months through July, according to data compiled by Bloomberg and based on two years of surveys. “The economy is weak and is going to stay weak,” added Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “The labor market will continue to struggle.”
Bank of America, the second-biggest U.S. lender, is speeding up a 2011 plan to trim $8 billion in expenses and more than 30,000 positions. Hewlett-Packard, the world’s largest personal-computer maker, will slash 29,000 jobs instead of the 27,000 it announced in May. Staples is accelerating its shutdown of 15 American stores as consumers shift to using fewer traditional office products such as folders.
The share of U.S. chief executive officers planning to add employees or expand investment during the next six months declined in the third quarter compared with April through June, while a bigger share said they’d cut jobs and spending, according to the Business Roundtable survey conducted Aug. 30 to Sept. 14. The group’s economic-outlook index slumped to 66, the lowest since 2009, and the portion of CEOs who anticipate sales will fall more than doubled to 15 percent from the prior period.