Weakening demand is forcing new and accelerated cost reductions at companies from Bank of America Corp. and Hewlett-Packard Co. to Staples Inc. and Eastman Kodak Co., dimming the outlook for an already struggling U.S. labor market.
Even as consumer confidence and housing show signs of recovering, sales for businesses in the Standard & Poor’s 500 Index fell 0.9 percent from a year earlier in July through September, the second consecutive quarterly drop and biggest decline since 2009, according to analyst forecasts compiled by Bloomberg. A 1.2 percent gain projected for October-December still is smaller than the 5.4 percent rise in this year’s first three months.
“It’s just going to be a long, hard slog,” said Joshua Shapiro, the top-ranked forecaster of the U.S. economy for three consecutive months through July, according to data compiled by Bloomberg and based on two years of surveys. “The economy is weak and is going to stay weak,” added Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “The labor market will continue to struggle.”
This poses a hurdle for consumer spending -- which accounts for about 70 percent of GDP -- at a time when other pillars of growth are starting to slacken. Exports decreased 1 percent in July after rising in May and June. Orders for durable goods other than transportation equipment dropped in August for a third consecutive month, signaling slowing business investment.
Retail and consumer-related equities will come under pressure after “a phenomenal run” helped by Fed actions that boosted asset values, Ablin said. While the S&P 500 Retailing Index is up 25 percent this year, it has fallen 1.5 percent since Sept. 13, and the Consumer Discretionary Select Sector SPDR Fund, up 20 percent since Dec. 31, is also off 1.5 percent.
Some companies’ own woes are prompting renewed expense control. Rochester, New York-based Kodak said on Sept. 28 it will eliminate at least 200 more jobs in 2012, on top of the 1,000 cuts it announced on Sept. 10, as the bankrupt photography pioneer shrinks into a commercial-printing-focused business. That follows a global reduction of 2,700 this year.