Left Margin

Carnage at Yahoo & the Lopsided Economy

By Carl Bloice - BlackCommentator.com Editorial Board
BC
April 12, 2012

http://www.blackcommentator.com/467/467_lm_carnage.php

The March unemployment figures arrived just as I was
thinking about Yahoo and the 2,000 workers the company
just laid off. Although it won't be known until next
week where exactly the axe will fall and which techies
will lose their jobs, my friends in the industry say
most probably won't have much trouble finding new work
- unless they happen to be new entrants into the field
or over 40 years old. (Yeah, it's that way) Just why
Yahoo is sacking 14 percent of its workforce is
somewhat murky. The company isn't going broke; it just
isn't turning in a profit volume that investors seek,
especially when measured against rivals Google and
Facebook.

The Associated Press reported that "As traumatic as the
job cuts may be for laid-off workers," industry analyst
Scott Kessler says Yahoo needs to prune its payroll to
show Wall Street that the company can be run more
efficiently than it has been in recent years. "Last
year, Yahoo produced revenue of $353,000 per employee
while its two biggest rivals, internet search leader
Google Inc. and social networking leader Facebook Inc.,
each generated $1.2 million per employee," said AP.

Quiet as it's kept, that's how capitalism works.
Produce not enough value for the owners and you can
find yourself headed for the unemployment office.

Also, lurking in the background here is an ongoing
challenge to the current company management from a
certain hedge fund and the indication that the most
important asset being highlighted and coveted is the
firm's huge use data base collected from its nearly 700
million users and thousands of advertisers - "data that
drives deep personalization for users," which Yahoo
says can "create a new generation of more personalized
online products."

"With a clear focus on profitability and growth, the
company will be disciplined in its investments and
radically simplify how it builds, launches and
maintains many of its properties and products," a
company press release read.

"We need better execution to accelerate time to market
and to better monetize the attention we have," said
Yahoo CEO Scott Thompson, the man wielding the layoff
axe.

Yahoo wasn't the only company announcing a 14 percent
staff reduction last week. J.C. Penney laid off 600
employees from its corporate headquarters April 6. It
also said it will soon close its Pittsburgh call center
scraping the jobs of nearly 400 workers we can be sure
will have difficulty finding new employment. A majority
of the jobs are part time and a company spokesperson
told the media the sacked workers are unlikely to be
absorbed into other units of the retail company.

Penney's new CEO Ronald B. Johnson received $53.3
million in total compensation last year, third on the
top 100 list. "Last year, Mr. Johnson left his position
as senior vice president of retail at Apple, along with
Apple stock worth $101 million at the time that had not
yet vested," the New York Times reported the day after
Johnson announced the layoffs. "So, as part of his pay
package, J.C. Penney gave Mr. Johnson a one-time stock
award worth $52.6 million. (As of the end of last week,
his Apple stock would have been worth about $159
million. His Penney stock was worth $58 million.)"

Yahoo CEO Scott Thompson is also a highly paid Silicon
Valley insider, having moved less than four month ago
from eBay's PayPal payment service. His last reported
compensation pay package there was $10.4 million paid
out in 2010. Yahoo offered Thompson a deal that
includes a $1 million salary and a bonus of from
$1million to $2 million this year, depending on company
performance and Stock options valued at $22. 5million.
According to The Economic Times, Thompson is also
reaping $1.5 million to offset money he forfeited by
leaving PayPal. "A $6.5 million chunk of the stock
awards are also meant to offset some of the
compensation he would have gotten at PayPal, according
to the filing," it said.

Thompson apparently botched the staff reduction process
from a public relations point of view. In an arena
where a one-big-family ethos is promoted, it was
consider uncouth for him to have announced the
terminations without saying why they were being
undertaken or what the company's future plans are.

"Thompson also sought to boost sagging employee morale
in a staff memo Thursday,' reported AP. The memo said
the plans would be revealed April 17. Thompson said he
wanted to be "fair and respectful" to the laid-off
employees before discussing the future.

Whether or not the laid off Yahoo workers, or those at
J.C. Penny are able to find new jobs quickly, what each
of them is going through at the moment will, indeed, be
"traumatic." Their former bosses will experience some
drama but no trauma.

Which brings us back to the newest unemployment figures
and the millions who are out of work, will soon be out
of work, will see their unemployment compensation run
out, will lose their homes or be unable to pay their
medical expenses or afford college tuition.

"What distinguishes this jobs recovery from others is
the sheer scale of the job loss that preceded it," the
New York Times reported April 7. "The economy has
regained 3.6 million jobs since employment hit bottom
in February 2010, but it is still missing nearly 10
million jobs - 5.2 million lost in the recession and
4.7 million needed to employ new entrants to the labor
market. The Economic Policy Institute estimates that at
the average rate of job creation in the last three
months, it would take until the end of 2017, fully 10
years from the start of the Great Recession in December
2007, to return to the prerecession jobless rate of 5
percent."

"And there is no guarantee we will ever get there,"
wrote journalist Teresa Tritch, a members of the
paper's editorial board. "It took about four years to
close the job gaps created by the recessions that began
in mid-1981 and mid-1990. In the tepid expansion after
the 2001 recession, the job gap had still not closed by
2007."

"Despite ongoing improvements, the labor market still
has a deficit of nearly 10 million jobs, and the lack
of demand for workers means unemployment remains high
and wage growth for people with jobs remains low,"
writes economist Heidi Shierholz of the Economic Policy
Institute. "To get back to full employment in three
years we would need to be adding around 350,000 jobs
per month. The nation's labor market remains weak, and
we continue to need aggressive policies to create
jobs."

"The fall in the unemployment rate was actually a bad
sign for the economy," read Reuters. "The jobless rate
dropped because workers were exiting the workforce,
possibly because they were discouraged at job prospects
although some likely were retiring as well. The
workforce shrank by 164,000 people. The participation
rate, which is the percent of the population in the
workforce, fell to 63.8 percent from 63.9 percent in
February."

Most of the decline in the participation rate is being
ascribed to workers becoming discouraged and dropping
out of the labor market.

The national jobless rate slipped to 8.2 percent in
March. African-American unemployment dropped to 14.0
percent in March. In March of 2011, the rate was 8.9
percent overall and 15.6 percent for African-Americans.

The jobless rate for both African American and Latino
youth were lower in the first quarter of 2012 than for
the same period last year. However, the employment-to-
population ratio for young African Americans, which had
risen a bit in February, slipped in March, back to
where it was this time last year. This may indicate an
increase in the number exiting the workforce, perhaps
because they found job prospects too discouraging. For
all Latino workers, the ratio has remained pretty much
the same over the past year.

"This monthly jobs report may be a one-off
disappointment or it could signal that the job market
is doing worse than we thought," economist Jared
Bernstein suggests we should be saying. "Either way,
there's too many un- and underemployed people out
there."

The fourth paragraph of the front page New York Times
story on the new jobs stats read: "The slowdown
suggests that employers remain cautious about hiring as
they digest the impact of rising gas prices, especially
on consumers, and as they face uncertainty about health
care and pension costs." Liberal economist Robert Reich
disagrees.

"You will hear other theories about the hiring
slowdown, but they don't wash," he wrote on his blog
April 6. " You will hear other theories about the
hiring slowdown, but they don't wash.

"It's not due to `uncertainty' about the economy.
That's a tautology - the economy's future is always
uncertain, especially when consumers don't have the
dough to keep it going."

"American consumers, in short, are hitting a wall,"
continued Reich. "They don't dare save much less
because their jobs are still insecure. They can't
borrow much more. Their home values are still dropping
and many are underwater - owing more on their homes
than the homes are worth.

"The economy has been growing but almost all the gains
have gone to the very top. As I've noted, this is the
most lopsided recovery on record."

Like the layoffs at Penny, the upheaval at Yahoo is not
unrelated to the Great Recession. Over the past four
years, there have been six large layoffs at the firm;
1,500 workers were sacked in 2008. Last month's jobless
figures don't say clearly whether a real recovery is
underway and, if so, whether it can be sustained. But
with industry executives raking in fantastic and
unwarranted riches while the lives of workers from
Sunnyvale to Pittsburgh are rendered ever more
precarious, whatever is happening certainly is
lopsided.
________________

BlackCommentator.com Editorial Board member Carl Bloice
is a writer in San Francisco, a member of the National
Coordinating Committee of the Committees of
Correspondence for Democracy and Socialism and formerly
worked for a healthcare union

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