Earning Season

We are currently in a period where corporations are reporting their year end or second quarter earnings. I expect most companies to do well, but what I’m not sure of is how well? I’m probably oversimplifying but in my opinion two factors pulled the US out of the poor economy in 2001 and 2002: interest rates were lowered creating a housing bubble and the job market tightened. The later is mentioned because big business was able to create outstanding productivity returns without having to increase payroll. The old “you are lucky to have a job” situation. That propped up the corporate world enough to start seeing the stock market reflect that value. Unfortunately for the little guy, the profits weren’t shared. Most went to the executive levels and since President Bush’s tax system doesn’t apply at the same rate to the rich as it does to the middle class, those executives were able to take advantage of the low interest rates to invest in real estate. Granted the low interest rates helped many people, but second homes were being built on the backs of employees who didn’t get large raises. So, now that the employment market is swinging back toward the every man (although, not entirely in the US) it will be interesting to see if productivity gains keep pace.

What also is happening is that businesses are tucking away compensation costs into variable forms – bonuses. This is great for the books because it doesn’t show up as a fixed cost, but I have to imagine the analysts sooner or later devaluing that number. They aren’t naive. Besides, the best employees are going to eventually want their compensation to be distributed more frequently and assuredly. The uncertainty of a bonus loses its appeal. The best employees don’t want that anxiety, especially when they get to be anxious about the health care cost increase that is inevitable.

About benleeson
My name is Ben Leeson. I currently work for a large financial company in IT. I went to school at Marist College in Poughkeepsie, NY. I graduated with a B.S. in Business Administration concentrating in HR. Professor William Brown taught me and I enjoyed his classes; even acquiring an appreciation for just about all things HR. I didn’t pursue a job in that field after college but I’ve kept up with it. This blog will further my fascination with all things HR. I hope to grow my knowledge of the area through thoughtful writings and spirited feedback. I will attempt to have a fairly routine style so anyone reading can come to expect certain segments. Please excuse my incorrect grammar and occasional misspelling.

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