Have You Restored The Match?

A common complaint of many employees is that rebounding corporate earnings haven't meant things are getting better for them, in part because many companies have elected to just hoard cash.

But FedEx Corp. on Monday sharply boosted its earnings outlook and also said it would put more money back into employees’ pockets: The company said it would fully restore matching contributions to workers’ 401(k) plans beginning Jan. 1, 2011.

FedEx suspended its 401(k) match on Feb. 1, 2009, in the depths of the recession, joining a long list of blue-chip firms that hacked pay or benefits to conserve cash.

FedEx’s move to restore its 401(k) match is part of a trend, although many workers may wonder what’s taking big companies so long. Of those large employers that had reduced or suspended matching contributions since September 2008, only half have since restored them, according to a spring survey by consulting firm Towers Watson.

But the survey also found that “virtually all [companies] indicated they are considering reinstating all or a portion within the next 12 months.”

We'll soon see which companies walk their talk . . .

What Many American Employees Dream Of . . .

Lots of action on the last post regarding extended unemployment benefits . . . check out the comments under that blog on the website. www.crediblyconnect.com

Today we look at the nasty mood of the American worker -- what many would like to do if they thought they could get another job and not go to jail . . .

Check it out (cut and paste this site into your browser): http://www.break.com/index/office-worker-goes-absolutely-insane.html

As cuts continue in many workplaces and wages stagnate in others, the pressure builds . . .

Unemployment Compensation: A Contrarian View

Contrarian -- almost wasn't worth saying. Anything you see here will be contrarian.

Like BP -- everyone's whipping boy. And, maybe they deserve it, but for my money they deserve a trial by jury first. Obama is not their judge, jury and executioner and his overt extortion attempt for $20 billion was, let's say, "unbecoming."

Bill Bonner, a guy a like, (one of the few), is also a contrarian on the relentless extension of unemployment benefits and rather than summarize his take, here it is unexpurgated:

And as for failing to extend unemployment benefits, was that really a bad thing?

“Where you stand depends on where you sit,” goes the expression. If you’re sitting in an unemployment office, you’re likely to be in favor of more benefits. If you’re paying taxes, struggling to make ends meet, you might resent having to pay more for others who don’t work.

Krugman points out that it’s not their fault. Unemployment compensation doesn’t really reduce people’s desire to find work – not when there are 5 applicants for every job. Still, adjustments need to be made...and not having any money coming in the door is bound to be a motivator to make them.

The real reason people are unemployed is that the price of labor is too high. We’re in a period of price and debt destruction. Output prices are going down. So, labor prices should be going down too.

But labor prices are ‘sticky’...they don’t go down easily. Especially when there is unemployment compensation to keep them stuck. Unemployment compensation just interferes with the correction, delaying the necessary adaptations.

Like it or not, he's right. Unemployment is like our national debt -- we keep on issuing it, hoping against hope that we can dodge the bullet of one day having to default or inflate our way out of it -- either way stiffing our creditors. Until we realize that our wages have to go down to take into account being beaten to a pulp by the rest of the world who can now manufacture most of the same things we make a lot cheaper, we're just buying time and at some point we'll have to pay our debt.

Until then, you can go wild and call me names. Thank you.

"Don’t Comply? Go To Jail. The Obama Administration’s Approach to Compliance"

The text of my talk last week in Lake Tahoe begins . . .

"Henry Clay called government "the great trust," but most Americans today have little faith in Washington's ability to deal with the nation's problems. Indeed, public confidence in government is at one of the lowest points in a half century. According to a survey from the Pew Research Center. Nearly 8 in 10 Americans say they don't trust the federal government and have little faith it can solve America's ills, the survey found.

The survey also found that just 22 percent of those questioned say they can trust Washington almost always or most of the time and just 19 percent say they are basically content with it. Nearly half say the government negatively affects their daily lives, a sentiment that's grown over the past dozen years.


The focus of the talk is why we have so little faith and focusing on one of the major reaons -- government's need for money and a willingness to get it any way they can -- trying to balance the budget through aggressive enforcement -- through fines and threats of imprisonment for matters that not long ago were not even considered criminal.

Everything from labor laws to financial regulation to investment to something ostensibly as simple and innocent as taking money out of your account at the bank has been criminalized and people who never thought of themselves are criminals are now going to jail.

This talk details the "why's" and "how's."

If you would like a copy of the entire talk, e-mail me at: jimkarger@mac.com

Best for the week,

Karger

Preparing For A Double-Dip

The fragile economic recovery is in trouble -- deep trouble. While some experts see the possibility of falling back into recession as unlikely, the market doesn't agree, now approaching bear territory and pricing a double-dip into the future, the near future.

Why?

Lots of reasons, a primary one being unemployment. The last recession wiped out 8 million jobs and there has not been much positive job growth since the recession technically ended.

Other factors include housing where there has been no demand absent the now-expired homeowners tax credit, the expiration of the economic stimulus program, with some asking what did we get for $787 billion?

Pending tax increases, which includes the expiration of the Bush tax cuts at the end of 2010 doesn't portend anything good for GDP, and consumer confidence continues to plummet - and since the domestic consumer is 66% of the American economy, how he/she feels is important, very important, and so it is not surprising that consumer spending has been anemic.

Add in the European debt crisis with Spain and Portugal perhaps joining Greece soon, and there is a question about the health of the European economy and banking system.

Finally, there is the current U.S. regulatory environment, which is miserable, some say unworkable. If asked, I would say that and, indeed, did in a talk last week to a business association in Lake Tahoe. (I will publish that talk here tomorrow in another blog.)

Since anyone who reads knows these things, including business leaders, it is not surprising that there has been no commitment to hiring or capital expenditure. Rather, if demand for products or services rises, hours of existing employees are ratcheted up and temporary employees are hired. Regular, full-time employees are an investment that most companies are not yet willing to make.

And that brings the problem full-circle - without hiring there will be no material increase in consumer confidence or consumer spending and without spending, well, the deal falls apart. In our minds, the question is not whether the economy will double-dip under current conditions, but when, and whether this dip will surpass the last one.