Diary of a Financier

Another Round of Layoffs!?

In Economics on Thu 30 Jun 2011 at 00:25
  • Major Financials have all announced a new round of layoffs.
  • Such widening of operating margins can only drive profit growth for so long, particularly since stalling revenues are alarming for both organic business growth & the economy.

Add another straw on this camel’s back: Wall Street has come to the unanimous decision that it’s time for another round of layoffs.

First Morgan Stanley, then Merrill Lynch, Goldman Sachs, JP Morgan, now Bank of America. With the game already rigged in their favor, it looks like the Financials’ businesses still can’t sustain organic growth. Troublesome to say the least.

For those who were wondering from where EPS growth would derive in 2h2011, look no further than widening operating margins–which already boast all-time highs for as-reported S&P 500 companies. When the top line starts declining (even despite an accelerating bottom line), it isn’t good for the economy, GDP, or long-term business prospects. I would suggest tracking the layoff stories closely again, a la 2009. Will this leak to other service sectors? manufacturing? industrials? transport? tech? energy? I can’t imagine the public sector providing a counterbalance this time around.

–Romeo

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  1. […] entry on Thursday noted the onset of yet another wave of layoffs in the Financial sector. This is the […]

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