You Call This a Recovery?

By Rick Aristotle Munarriz
November 5, 2009 | Comments (6)

Recs

5

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One of the reasons why corporate profits are bouncing back so quickly is that companies have done some serious payroll trimming during the downturn.

Cynics can argue that corporations could have done this sooner. Many of the companies doling out pink slips haven't necessarily been slapped with slowdowns in productivity, even if workforce morale issues are harder to gauge.

Following the logic that layoffs come in response to companies hunkering down for an economic lull, shouldn't we be in a hiring boom if the recession is roadkill in the rearview mirror?

It certainly doesn't appear that way going by some of the staff-slashing moves this week.

  • RealNetworks (Nasdaq: RNWK) is laying off 4% of its workforce today, according to Kara Swisher's BoomTown column.
  • Microsoft (Nasdaq: MSFT) turned heads by announcing its first wave of layoffs in company history back in January. It dismissed 800 hires this week. Even if this is part of the original 5,000 jobs targeted for elimination back in January, an improving economy, the success of Bing, and the release of Windows 7 haven't been enough to sway Mr. Softy.
  • Johnson & Johnson (NYSE: JNJ) will be saving as much as $900 million  next year, primarily by letting more than 7,000 employees go. No more tears?
  • Time Warner (NYSE: TWX) is restructuring its struggling magazine publishing subsidiary with 280 casualties in the way.
  • Sprint Nextel (NYSE: S) is cutting dozens of jobs in its wholesale business.

So what's the deal, Corporate America? Is this just the recession's final gasp or are some of these companies expecting a double-dip recession?

It's important to point out that some companies are going the other way. Google (Nasdaq: GOOG) is in hiring mode again. And some of the jobs being slashed -- Sprint Nextel's languishing landline business and Time Inc.'s magazines -- are in industries that aren't expected to grow, regardless of the economic turnaround.

However, there comes a point where enough is enough. Companies that are fine tuning their payrolls today probably could have -- and should have -- done this a year ago when folks were bracing for the worst.

I guess it'll mean more paranoia in the workforce, but with chunkier-than-expected bottom lines.

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Google is a Motley Fool Rule Breakers selection. Microsoft and Sprint Nextel are Motley Fool Inside Value selections. Johnson & Johnson is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended a diagonal call on Microsoft. Try any of our Bing-alicious newsletter services, free for 30 days.

Longtime Fool contributor Rick Munarriz is not a fan of layoffs in good times. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 05, 2009, at 3:05 PM, Klaus23 wrote:

    you can start praying for Microsoft success, with them will go the entire industry!

  • Report this Comment On November 05, 2009, at 3:34 PM, KeitaiOtaku wrote:

    Pray for Microsoft's demise. When they're gone... your os becomse FREE.

  • Report this Comment On November 05, 2009, at 4:59 PM, imyoung wrote:

    "I guess it'll mean more paranoia in the workforce, but with chunkier-than-expected bottom lines."

    and higher executive remuneration....

  • Report this Comment On November 05, 2009, at 5:02 PM, Fool wrote:

    Yeah, a free OS is going to do the economy wonders. NOT

  • Report this Comment On November 05, 2009, at 6:17 PM, xetn wrote:

    Fool:

    Yes, a free OS is exactly what a lot of companies need; a way to slash spending on infrastructure. And, as an aside, Linux is much more stable, less susceptible to viruii. The result: you are not required to add a lot of overhead such as anti virus to your systems. Not only do you get a free OS, but it comes with thousands of free applications which get automatically updated along with the OS for FREE. As an IT guy, this makes my job a lot easier while improving the bottom line of my company.

  • Report this Comment On November 06, 2009, at 6:34 AM, veryverda wrote:

    RAM, Finally. Some rationale in the right direction.

    The american people, with all the information available out there, look deeper into why. Anyone half paying attention knows the tactics polticians play, and this is a very bad case of false politics. The gov't is all about being the dominant player in all our lives, and spin economic news to suit their purposes. We don't buy it. For all we know, this paltry excuse for a president is dictating onerous regulations and taxes on all of corporate america, in the name of political power. He's using tarp money like a sledge hammer to destroy his political enemies, and NOT to better american prosperity. Plain and simple. He's bullying Congress like he's still back in Chicago, dealing with a bunch of vulnerable, poor community voluteers. He has NO respect for the american people, and it shows in our economy. He's going for the jugular. Money is power, and he's got a pile of it to push america around. There's your answer. The american people shot themselves in the foot when they elected

    the angry faker.

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