Big layoffs are coming for some big companies. eBay (EBAY) announced that it will layoff 2,400 people, about 7% of its workforce before April. This, after reporting a 10% increase in profits last quarter. American Express (AXP) also says it will cut 4,000 jobs, or 6% of its work force, despite an 11% rise in fourth quarter profits.
Yahoo Finance Senior Columnist Mike Santoli says the layoffs are a result of shareholder pressure to maintain growth and revenue. “American Express and eBay are in a situation where they're basically not fast growth businesses but rather ones that investors are demanding keep the profit margin up.”
For eBay, the cuts come as the company is restructuring. In September, eBay announced they would spinoff online payment service PayPal-- a move the company hopes will allow each unit to focus on individual services and also open up the opportunity for a potential sell.
Santoli says layoffs are part of the productivity religion that corporate America believes in. “I’m reminded of the 1990s when essentially you had great growth. Corporate America did wonderfully well and every single year big companies were restructuring. They were trimming down constantly. That’s the way they are built. They are proud to run lean and they're not proud to add head count.”
Even with unemployment dropping and new jobs being created, wages remain stagnant, struggling to keep pace with inflation. Thousands of layoffs may also put downward pressure on wage growth.
Santoli doesn't see a sudden spike in wages coming anytime soon. “This vigil for wage inflation to really catch fire is probably going to go on. It’s not really going to happen. The whole corporate psychology is built to keep it this way.”
Santoli thinks jobs numbers will keep growing but they won’t necessarily come from big multi-national companies. “You have exuberant head count growth in young technology companies and various areas of retail. That’s still going to happen. That always happens in the economy here. It’s really the big companies saying we have to keep margins up and how are we going to do it.”
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