In other words, things are returning to normal. Uncertainty is in the stock market, layoffs are in the Zeitgeist. Welcome to the real world. This is the way things used to be until around 1996, when the economy and the stock market took off in tandem. You can’t have all boom all the time. Life doesn’t work that way. But don’t go from irrational exuberance to irrational depression without at least a brief stay in the middle. The world isn’t coming to an end. You shouldn’t overreact to the negative news. Just as we old fuddy-duddies warned you not to overreact to the boom and expect it to go on forever.
Just accept the fact that things are back to their natural order, with employers holding the whip hand. “The pendulum has swung… back to a more stable, more healthy balance of power,” says James Citrin, a recruiter at Spencer Stuart. The idea abroad in the land that corporate job cuts are approaching epidemic levels is almost certainly wrong–but unprovable either way. The widely followed numbers from the folks at the Chicago outplacement firm of Challenger, Gray and Christmas are based on company announcements and filings, but are far from complete. Most economists pay more heed to government statistics like new unemployment claims and new jobs created, which have been mixed. In addition, factor in the fact that layoff announcements tend to emphasize the worst. The idea is to get Wall Street to bid up your stock because you’re addressing your problems. Sometimes it works, sometimes it doesn’t.
The one clear thing that Federal Reserve Board chairman Alan Greenspan said in his Senate testimony last week is that it’s not clear what’s going on, other than that the economy is slowing and we are “probably very close to zero [growth] at this particular moment.” (People made a fuss over his supporting the concept of a tax cut in principle–but he has always said he preferred tax cuts to new government spending. It was so obvious that he’d support a cut that I predicted it when he cut interest rates in early January.)
Another clear thing: although Internet stocks are croaking, the Net is alive and well at mainstream U.S. companies. In coming years, profits will rise as the Net displaces workers and makes companies more efficient.
I don’t want to be media-centric, but part of the gloominess around these days may have to do with what’s going on in the media business. Some of the areas suffering the highest-percentage cutbacks–can you say “media Web site”?–until recently were hiring with both hands. Advertising is weak, partly because dot-coms no longer have venture capitalists’ money to play with. Rumors to the contrary notwithstanding, journalists are human beings. When we see layoffs in our business, we get jumpy. Until recently, things were pretty good. Which may have been a reason we kept seeing all those stories about companies’ supposed inability to hire good people.
To continue this economic contrarianism, even the stock market did better than it seemed to last year. The Standard & Poor’s 500 turned in its worst performance since 1977–but most of its stocks went up. Aronson + Partners, a Philadelphia money manager, says 274 of the stocks in the index at the start of last year rose, and only 225 fell. The index as a whole sank because heavily weighted companies like Microsoft, Cisco and Lucent took it in the chops.
Much of the gloom these days seems to be coming out of Washington, where the incoming Bushies are putting out the word that things look really grim. I don’t attribute everything to politics, but it sure is easier to run a big tax cut through Congress and to disparage your predecessors by saying the economy is messed up than by saying we’ve had a great run, but normality has returned. And writing about imminent doom is so much more fun than saying something sober about the world returning to normal.
