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. labour market.
Even as consumer confidence and housing show signs of recovering, sales for businesses in the Standard & Poor’s 500 Index fell 0.9% 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% gain projected for October-December still is smaller than the 5.4% 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.
Partly because of the retrenching, companies in the S&P 500, excluding financial institutions and utilities, held near- record cash totaling $1.01 trillion U.S. in the first three months of 2012, S&P data show.
And even with the fragile labour 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% missing a prior estimate of 1.7% and below the first quarter’s 2%
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 ahead of a U.S. Labor Department report due Friday. Private employers added 130,000 workers, they predicted, and the jobless rate rose to 8.2% from 8.1% in August. That would mark the 44th consecutive month exceeding 8%, the longest streak in records since 1948.
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