Thursday, April 15, 2010

It Can't All Be Layoffs

If profits at the Fortune 500 are up $391 billion in the aggregate, coupled with layoffs of 821,000, then these firms are doing something else other than layoffs to help the bottom line. If every dollar of the profit increase were due to staff cuts, the average annual cost of a worker would be about $480,000, which is quite clearly nonsense. I imagine a healthy share of the profit increase is due to the re-financialization of the US economy, which is another way of saying "it's bullshit". But even if you factor in financial profits and layoffs, that still leaves significant chunk of profits due either to overseas operations or other domestic cost-cutting measures (some of which will undoubtedly result in layoffs at smaller firms).

1 comment:

Dennis said...

There is definitely a big accounting issue here: big banks lost outsize quantities of money in 2008, bringing down the estimate. I would say that the first thing to do to understand what really happened is to separate financial companies out of the sample -- otherwise you have this problem where you're comparing a $100 loss to a $1 gain in the next year and you don't know it.