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Warning. I think I've reached my Peter Finch from "Network" moment. I'm "mad as hell" about how Wall Street keeps celebrating job cuts as if they are a good thing for the markets and economy. I'm not sure I can take it anymore.
Shares of Macy's (M) rose more than 8% and hit a record high Thursday, even though the company announced it was closing some stores and laying off 2,500 workers.
But the mystifying thing about this news is that Macy's also reported strong sales for the holidays and a rosy outlook for 2014.
So if things are going so well, why is there a need to let that many employees go?
Macy's isn't the only company that's been rewarded for handing out pink slips. Regional bank First Niagara (FNFG) said Wednesday that it was cutting 170 jobs. Shares rose 2%, while the broader market and most bank stocks were flat.
To be fair, First Niagara said that the affected employees would be able to apply for other positions at the bank and that there would actually be 250 new openings.
But a layoff is still a layoff. And you can't help but grimace when you see a headline like this for the press release that explained the restructuring
First Niagara Tailoring Retail Banking Experience to Match Evolving Customer Preferences
In other words, the bank didn't want to cut jobs. Consumers made them do it.
Now I realize that businesses always have to make tough decisions about staffing levels. Sometimes demand isn't strong enough to justify a company's headcount.
But isn't the economy supposedly improving? Aren't stocks at record highs? What's it going to take for Corporate America to finally realize that the only road to a lasting (and more robust) recovery is to have as many people working (and therefore having the money to spend) as possible?
I may not have won a Nobel prize for economics but I'm pretty confident that this mathematical equation is valid.
Lower unemployment rate = higher gross domestic product growth
Fortunately, the pace of mass layoffs is decreasing. According to the latest report from outplacement firm Challenger, Gray & Christmas, the number of planned job cuts announced in December was the lowest since June 2000. And for the full year, 2013 had the least number of layoffs since 1997.
But as Macy's and First Niagara show, some companies continue to trim jobs.
That's a problem given that there are still millions of unemployed workers in America who have not yet given up the search for a job. And many of them are now faced with the possibility of losing jobless benefits.
If companies begin to hire more again instead of cutting jobs, doesn't it stand to reason that the newly employed will be able to boost GDP by spending and investing?
It's a win-win for Corporate America and Main Street when sales and profits are both going up. That's how you create a self-sustaining recovery. Enough with trying to juice earnings and market returns through cost cutting.
I've written about this topic several times in the Buzz, most recently in October.
At that time, shares of tech firms AOL (AOL), Hewlett-Packard (HPQ) and Cisco (CSCO) were rallying on job cut news. So were shares of big bank Wells Fargo (WFC), drug giant Merck (MRK) and German industrial conglomerate Siemens (SI).
I plan to keep writing about this until we see even stronger growth in hiring and fewer big layoff announcements ... or until Wall Street stops perversely cheering the short-term jump in profit margins that tend to take place when companies put people out of work. Take the long view, traders!
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