There is a disturbing trend that is going largely unnoticed by many financial stations. Despite the fact that the economy is getting better, companies are laying off employees again. This is despite the new tax cut deal that will lower payroll taxes and give employers cost certainty. I wrote in a previous post about how demand, not tax cuts, create jobs. Are the layoffs that are taking place nationally a sign that demand is weaker than expected?
TJX Companies (TJX) laid off 4,400 worker at the end of last week. The company operates under the T.J. Maxx, Marshalls, HomeGoods, A.J. Wright, Winners, and HomeSense brands. Yahoo Inc. (YHOO) is next up: The Internet search company is laying off 600 to 700 workers this week.
Yahoo has struggled to find its place in the Internet marketplace since Google (GOOG) burst onto the scene. The company has failed to reinvent itself as an ad company despite the growth in the online advertising market. The company has struggled to find growth since making the abysmal mistake of turning down a generous buyout offer from Microsoft (MSFT).
It’s a mixed bag at GM (GM). The negative is that the company has to get rid of thousands of skilled workers, shedding at least 2,000 more employees. A lucky few will be eligible to take a buyout. According to the AP, the buyout offer is for $60,000 in pay and full benefits. Other employees are out of luck and will receive no such offer. The positive part is that GM is hiring 1,000 new engineers.
My take on all of this is that you can’t draw a conclusion on the United States economy as a whole by just looking at these companies. The layoffs are an indictment of the operating performance only of these particular companies.
Yahoo has replaced CEOs, changed its business model, and tried everything under the sun but is still an incredibly flawed company. GM is still trying to reduce legacy costs so that the company can effectively compete in the auto sector. TJX has done a good job with its TJ Maxx stores but has failed to craft a successful strategy to make its A.J Wright stores popular with customers. Consequently, A.J. Wright is going out of business after Christmas.