Wall Street Earning Trends - May Lead To More Jobs

Investing in the stock market is probably one of the smartest things someone can do with money. Sure you can get burned by the occasional dip in the market that will happen after large run-ups due to economic factors such as the internet being born and home prices sky-rocketing. However, its not like people didn't loose jobs and careers at these companies either during the same time period.

The stock market has more to do with employment than most people think ... especially if you work for a public company. What was the first thing many companies did when 'numbers started looking bad' in 2008/09? They fired people...or 'reduced headcount' as the CEO's like to say. The #1 goal of a public company is to make money for its shareholders - not have happy employees - so remember that the next time your boss tells you how much they care about you. You might think that the big boy CEO can't be fired - but if enough shareholders make noise - he'll be gone faster than he's out of the office everyday to catch his noon tee-time at the country club.

The thing is - every good businessman (or woman) knows you need great employees to make a huge profit and grow as a company. In late 2008 and 2009 it was all about firing people so that the company expenses went way down to be in line with the lower consumer demand - who were paying $4.75 a gallon for gas. Now consumers are starting to show signs of life and companies are starting to see sales growth over last year.

So what's the problem?

You can't grow a company with a limited staff. Which is exactly the challenge CEO's and small-business leaders are facing now.  If you take a look at earnings from major companies ... cutting out all the GAAP and non-GAAP stuff .... you generally see that profits (dollars you take home) are up - but revenues (dollars that come in the door) are flat or sometimes down. Why is that? For the most part, I would suggest that they don't have the staff capable of growing the revenues much further than where they already are. (Which is a CEO's Death Sentence)

Since most companies went on a cost-cutting trip about a year ago, its not like they can just trim more cost to make the profits grow. They are going to have to attract new business by expanding the work force to handle demand - which also should continue to increase off lows. Its not like its going to be a big hiring party all at once...as most bosses do have regular matches at the golf club to attend to :) But its funny how these 'leaders of business' will copy each other when one of them makes a move. Trust me, if Google has a Press Release about hiring 200 new employees... you can expect the folks over at Yahoo/Microsoft will be doing the same a few months later. Its not like the major shareholders will call the competing company or anything and ask them how they will respond to the new jobs....(they will)

The moral of the story? The natural business cycle took us to highs higher that high in the 2000's ... its okay to take a breather for a while. In fact, its a natural and healthy thing for an economy to go through a downturn. In many ways it helps business and employers learn new training and practices that help employees in the long term. Obviously its not cool if you're going through it trying to find a job and struggling to pay bills, but know that it will turn around one day. Give Wall Street another quarter of flat revenue with meager profits and the big guns with multi-millions of shares (let alone dollars invested) will be looking for answers. The big institutional investors were your worst nightmare when times were tough - because they were the ones putting the pressure on CEO's to cut costs in wake of the recession. Now, these guys are your best friend ... seriously. They will be calling they guys everyday looking for growth over the previous quarter, and the CEO's know that they don't have the staff to grow the company. They know it. Its truly impossible, because even if they have an influx of orders or business - they don't have the staff available to handle all those requests.



Bottom line is that Wall Street companies will start hiring soon. Probably starting as soon as January 2011. I'm not talking about the cashier at the local Wal-Mart during Christmas (although an important job - not the type of hiring I'm talking about) We're talking the Google's, HP's, Yahoo's, eBay's and other huge California public companies starting to hire aggressively for high paying talent. Those are the jobs that move Wall Street and unemployment numbers - because they trickle down to give the guy at the corner market a job too. Even if you don't have the skills for those jobs, when they become available - it will mean lower skill jobs are on the way. Companies don't grow paying a guy 10 bucks an hour - you make money by hiring college grads that know what the next generation is going to buy. Future employees are waiting.