Recession Hits U.S. Corporate Profits; Economy Might Be Next

Discussion in 'Economics' started by ASusilovic, Dec 3, 2007.

  1. U.S. corporate profits are in a recession, and the entire economy may not be far behind.

    Slower sales and higher energy and labor costs are forcing companies from Bear Stearns Cos. to Pitney Bowes Inc. to reduce spending and hiring. Their efforts to keep earnings from eroding even further raise the risk that the economy, already weakened by the steepest housing slide since 1991, may shrink sometime next year.

    ``The earnings recession has already arrived,'' says David Rosenberg, North America economist for Merrill Lynch & Co. in New York. ``We are going to see an economic recession in '08.''

    Corporate profits, as measured by the Commerce Department, fell at an annual rate of $19.3 billion in the third quarter from the second, as domestic earnings dropped by $41.2 billion. The drag from sagging U.S. sales and huge writedowns offset robust earnings abroad, fueled by the weak U.S dollar. The fourth quarter may be an even bigger bust.

    ``In the third quarter, the tide shifted, and for the worse,'' says Joseph Quinlan, chief market strategist for Bank of America Corp. in Charlotte, North Carolina. ``The domestic- profits squeeze is in its early stages and will be severe enough to overwhelm strong foreign earnings.''

    Caterpillar Inc. of Peoria, Illinois, the world's largest maker of bulldozers and excavators, shocked investors in October when it said it expected the economy to be ``near to, or even in recession'' in 2008. At the time, Dearborn, Michigan-based Ford Motor Co., the second-largest U.S. automaker, was still ``optimistic,'' Chief Executive Officer Alan Mulally said Oct. 15. ``There's a lot to be positive about,'' he told reporters.
  2. I hope Wendys will still be hiring once I blow up my account in the next bear market :(