Wall Street seemed upbeat today thanks to positive jobs numbers in a private-sector payroll report from ADP. Specifically, jobs increased 325,000 in December, led by the service sector and small businesses. Additionally, November’s employment numbers were revised slightly higher.
But lest you think everything is coming up roses, keep in mind that many big corporations in America still are reluctant to hire. In fact, they are continuing to cut back, based on recent headlines.
For starters, PepsiCo (NYSE:PEP) is considering cutting about 4,000 jobs, according to a New York Post report. Citing inside sources, the paper also said Pepsi might be reducing pension contributions to boost its earnings, too.
Also today, we learned that Kansas-based employees of Boeing (NYSE:BA) will be looking for work soon. The iconic aircraft maker will be out of Wichita entirely by 2013, leaving more than 2,160 workers in the lurch. Boeing has called Kansas home since the 1920s but decided the facility no longer would allow the company to produce planes “competitively” in the current market.
While the ADP improvement is mildly encouraging and the drop in unemployment from above 9% to the mid-8% levels is nice, these mass layoffs show that the labor market still has a long way to go.
What’s more, these cuts signal what likely is a disturbing trend in big corner offices beyond just Pepsi and Boeing. Aerospace workers nationwide are bracing for protracted cuts in Pentagon spending as federal budget cuts take center stage in this election year. The Boeing headline is worrying to workers at competitors like Lockheed Martin (NYSE:LMT) and Northrop Grumman (NYSE:NOC), but perhaps of greater concern is that Defense Secretary Leon Panetta is reviewing plans to trim $450 billion from the military budget over the next 10 years. Military contractors already have begun to consolidate manufacturing facilities and eliminate thousands of jobs from coast to coast in anticipation of this plan.
As for Pepsi, the company employs about 300,000 workers globally, so the layoff might seem small-time. But the move to cut back on benefits is very telling. Eliminating a 401(k) match would save Pepsi $75 million, according to the Post, but don’t think for a second that cash is needed to keep the lights on. Pepsi is sitting on eight consecutive quarters of year-over-year revenue gains — and is on track to see its fiscal 2011 earnings jump about 37% from 2008 numbers.
Pepsi isn’t in dire straits. It’s just squeezing employees to impress Wall Street.
Pleasant jobs reports like the one from ADP this morning are nice, but workers need to read between the lines. The sad reality is that while small businesses might be hiring and more jobs in the service industry might be available, blue-chip corporations continue to slash costs and benefits to improve their profits.
Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace??.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.