HR Carnival 7 January 2009

The New Year’s first carnival is up at Gautam Ghosh’s White Spaces.

My favourite post is Rick’s from Flip Chart Fairy Tales, rated for its topicality and importance.

Rick asks whether HR professionals are ready for the recession and quotes the CIPD’s prediction that 600,000 jobs will be lost next year and that the redundancies will continue into 2010.  In fact, they think this year will be so difficult, they suggest HR will seem more like ER (hospital emergency room rather than employee relations I think)!

However, according to Management Today, the CIPD is still advising companies to avoid redundancies, and to  ‘hold their nerve’:

"The organisation (the Chartered Institute of Personnel and Development to those not in the know) says an average redundancy costs employers £16,375 before any savings are made, and that it’s much better to hold on to employees and plan for recovery. Its chief economist John Philpott points out that redundancies come with a number of direct or hidden costs, especially when hasty firings ‘have to be quickly reversed by renewed hiring when economic conditions improve’. The CIPD’s advice: companies should ‘hold their nerve’."

My experience at the moment suggests companies are doing just that.  I was talking to one of my clients earlier today who said their main focus was on planning for the eventual upturn - and I’m noticing lots of other organisations doing this too.  I hope it continues - with this degree of optimism, we may yet be able to talk ourselves out of a recession as deep as the CIPD fears.

Chris Gunn: ASBL’s Lloyd Chapman Questions Whether Obama Stimulus Plan Will Favor Venture Capitalists

In a guest commentary published on The Exception Magazine’s website, www.exceptionmag.com; the President and Founder of the American Small Business League (ASBL), Lloyd Chapman questioned whether the, “latest economic stimulus plan that will come from President-elect Barack Obama and the Democratic Congress will likely contain new loopholes in federal laws and policies that will benefit wealthy venture capitalists that contributed heavily to Obama’s campaign and key Democratic leaders in Congress.” (http://exceptionmag.com/news/business/000223/obamas-stimulus-plans-will-favor-venture-capitalists-over-middle-class)

According to Chapman, “The National Venture Capital Association (NVCA) and it’s well-heeled members want the definition of a small business as “independently owned” changed to include firms that are actually not independently owned, but controlled by some of the wealthiest individual venture capitalists in the country and possibly even some of the country’s largest venture capital firms.”

Since the introduction of H.R. 3567, which as introduced would have allowed a single venture capital firm to own up to 51 percent of a small business and maintain status as an independently owned small business, the ASBL has fought to stop the inclusion of language it claims would destroy federal programs intended for small businesses.

The small business community at large seems to agree. After taking a strong stance against H.R. 3567, the ASBL has seen support from the Small Business Administration, the Bush White House, the U.S. Chamber of Commerce, the National Association of Government Contractors, and the National Small Businesses Association. (http://www.asbl.com/showmedia.php?id=624)

In his commentary, Chapman states, “Over the last few years, the NVCA and its members have spent millions of dollars lobbying Congress for changes in federal small business policies that would allow them to hijack billions of dollars in federal contracts earmarked for small businesses.” An assertion that is backed up by data from Maplight.org (http://www.maplight.org/map/us/interest/F2500) and by an April 24, 2008 story by Keith Girard from AllBusiness.com, in which Girard states, “The most recent effort is a case study of how Velázquez has thrown the game to big pharma, through the BIO [Biotechnology Industry Organization]. Out of three hearings on the bill since January, 10 of the 16 witnesses had ties to biotech and/or venture capital interests, two had general biotech backgrounds, and the rest were government officials. No one spoke on behalf of small businesses, according to Rick Shindell, who writes a newsletter on the SBIR program.” (http://www.allbusiness.com/company-activities-management/business-climate-conditions/9077284-1.html)

Chapman contends, “If President-elect Obama and Democratic leaders like House Speaker Nancy Pelosi are successful, the middle class economy could be damaged even further. Millions of middle class jobs could be lost as billions in federal contracts, which are currently flowing to legitimate small businesses, will be diverted to a small number of firms controlled by wealthy venture capitalists.”

Since 2003, there have been more than 15 federal investigations that have found fraud, abuse, loopholes and a lack of oversight in federal small business contracting programs. For all intents and purposes, small business programs have enough problems without having to worry about Congress building more loopholes into the system.

If the 111th Congress and the Obama Administration prove Chapman right, our nation’s nearly 27 million small businesses and the middle class economy will be the ones to suffer.

Stocks Tumble As Time Warner, Intel, Alcoa Take Dive

NEW YORK — A warning from tech giant Intel about poor business conditions and more evidence of rising unemployment left stocks with their biggest losses in a month Wednesday.

The news upended some investors’ hopes for a speedy economic recovery this year and sent the major stock indexes down more than 2.5 percent, including the Dow Jones industrials, which lost 245 points.

Intel’s second warning since November, as well as bleak outlooks from aluminum producer Alcoa and media industry bellwether Time Warner, underscored the breadth of the economy’s slowdown. In addition, the ADP National Employment Report said private sector jobs fell by a greater-than-expected 693,000 in December. That made investors nervous ahead of Friday’s employment report from the government.

But unlike the panicked declines seen last fall, Wednesday’s pullback was more orderly and stocks finished off their lowest levels of the session. Some retrenchment had been expected following sharp gains in recent sessions and a 24.2 percent rally in the Standard & Poor’s 500 index since Nov. 20 before Wednesday’s slide.

“Nothing goes straight up or straight down,” said Keith Springer, president of Capital Financial Advisory Services. “You do have some people who get skittish and start taking some profits, but I don’t think the up trend has been broken here.”

Wall Street has been absorbing poor economic and corporate news far better since late November, with some investors betting on a recovery in the second half of this year or by early 2010. But the latest round of unnerving news was too proved to be too much to set aside.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said the market was simply reacting to the day’s drubbing of bad news.

“One too many punches and the fighter finally went down,” he said.

Chip maker Intel Corp. said it now expects fourth-quarter revenue to drop a greater-than-expected 23 percent on a further weakening in demand from computer makers.

Other corporate news added to Wall Street’s downbeat mood. Alcoa Inc. warned late Tuesday it would slash its annual output by more than 18 percent and cut its global work force by 13 percent. And Time Warner Inc. said Wednesday it plans to book a $25 billion impairment charge in the fourth quarter for its cable, publishing and AOL units.

Intel dropped 93 cents, or 6 percent, to $14.44. Alcoa tumbled $1.23, or 10 percent, to $10.89, while Time Warner sank 69 cents, or 6.3 percent, to $10.29.

Wall Street was already worried about what the Labor Department’s report on employment would bring Friday. The government report is typically the most important economic reading each month because rising unemployment could endanger consumer spending, which accounts for more than two-thirds of U.S. economic activity.

The concerns sent the Dow down 245.40, or 2.72 percent, to 8,769.70, its biggest point and percentage decline since Dec. 1.

Broader stock indicators also tumbled. The Standard & Poor’s 500 index fell 28.05, or 3 percent, to 906.65. It was the biggest drop for the index since Dec. 1.

The Nasdaq composite index fell 53.32, or 3.23 percent, to 1,599.06, hit by the decline in Intel shares.

The Russell 2000 index of smaller companies fell 17.61, or 3.42 percent, to 497.10.

Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came to a light 1.24 billion shares compared with 1.34 billion shares Tuesday.

Bond prices were mixed Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.49 percent from 2.47 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, edged fell to 0.11 percent from 0.14 percent.

The dollar fell against most other major currencies, while gold prices declined.

Light, sweet crude slumped 12 percent, falling $5.95 to settle at $42.63 a barrel on the New York Mercantile Exchange. The decline, which erased a week of gains, came after the government reported commercial crude oil inventories jumped well beyond the increase analysts expected. The weak economy has eroded demand.

The ADP report raised questions about whether government steps such as interest rate cuts to lower borrowing costs and possible spending on infrastructure will be sufficient to revive the economy.

“The market has shrugged off some bad news recently, and it’s starting to get to the point where it can’t do that anymore,” said Scott Fullman, director of derivatives investment strategy for WJB Capital Group.

Before the decline Wednesday, the Dow had rallied about 20 percent from its multiyear lows in late November.

“We’ve had a big move,” Fullman said. “What we’re looking at now is just people getting a little cautious here.”

The drop in oil weighed on the energy sector. Chevron Corp. fell $3.39, or 4.4 percent, to $73.96, while Occidental Petroleum Corp. fell $3.53, or 5.7 percent, to $58.11.

Technology stocks were among the biggest decliners after the Intel announcement. Microsoft Corp. fell $1.25, or 6 percent, to $19.51, while Qualcomm Inc. fell $1.60, or 4.3 percent, to $35.55.

Financial shares fell after Oppenheimer & Co. analyst Meredith Whitney warned that banks could have to raise fresh capital in 2009 as they face continued deterioration of their balance sheets. JPMorgan Chase & Co. fell $1.79, or 6 percent, to $28.09, while Citigroup Inc. slid 31 cents, or 4.2 percent, to $7.15.

The market’s economic worries had been calmed a bit in recent days by President-elect Barack Obama’s proposal to slash taxes and help businesses. On Tuesday, Wall Street overcame gloomy economic readings to finish with a moderate advance. But investors remain eager for more details of the stimulus package, which could cost as much as $775 billion.

Overseas, Japan’s Nikkei stock average rose 1.74 percent, and Hong Kong’s Hang Seng index fell 3.37 percent. In Europe, Britain’s FTSE 100 fell 2.83 percent, Germany’s DAX index fell 1.77 percent, and France’s CAC-40 fell 1.48 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Ross Eisenbrey: Get Business Tax Cuts Out of the Stimulus Plan

It is heartening that the new Congress is tackling the economic crisis with the urgency it deserves. The economy is slowing dramatically, and 15 million Americans are now unemployed or underemployed. The numbers worsen every month, and if state and local governments meet their budget shortfalls by cutting services and laying off employees, the pace of job losses will accelerate. Without immediate and very sizeable intervention, unemployment could top10 percent next year.

Most of the stimulus plan proposed by the incoming Obama administration is exactly what is needed, including aid to states, an emphasis on education — including early childhood — and investment in the nation’s infrastructure — the backbone of a productive economy. The United States has allowed its infrastructure to deteriorate to the point that dikes and bridges fail catastrophically, our drinking water suffers, our mass transit systems badly lag the rest of the world, and our broadband connectivity is slower and reaches a smaller share of our citizens than equivalent systems in Korea, Japan and other allies and competitors. The condition of many school buildings — some built in the 19th century — is deplorable and hurts the performance of teachers and students. The money in this rescue package is a small down payment on what is needed to give the U.S. the world class infrastructure we need.

However, the tax portions of the package are a mixed bag. Middle class taxpayers will benefit from the AMT fix and the Make Work Pay tax credit, but the business tax cuts are mostly a waste of resources that could be much better spent elsewhere. The job creation potential of a one-time $3,000 tax credit for hiring new workers is questionable, at best, as are the stimulus effects of accelerated depreciation and reducing past income tax liabilities by taking into account recent business losses. It will be particularly hard to watch the banks and construction companies that made billions during the housing bubble get a windfall they don’t deserve.

It is instructive to compare the negligible job creation potential of these tax cuts with the hotly contested but far cheaper effort to rescue the domestic auto companies. If saving the Big 3 from bankruptcy would cost $100 billion — the mid-range of estimates by Mark Zandi of economy.com — but prevent the loss of 1 million to 3 million jobs, its “bang-for-the-buck” would equal or exceed even the best parts of the stimulus proposal, let alone the wasteful business tax cuts.

There are many causes of this downturn, including our astronomical trade deficit - the result of two decades of one-sided trade agreements and failure to respond to the unfair practices of other nations - which have not been addressed. The reckless greed of so many financial institutions and speculators is a major cause of our current problems, and the damage done to millions of homeowners remains largely unaddressed. The dwindling strength of unions has contributed to wage suppression, the loss of fringe benefits, and the end of retirement security for the average American. The ultimate health of our economy cannot be assured without addressing these problems and the dangerous growth in inequality associated with them. We need an economy that creates broadly shared prosperity, not just for executives and professionals, but for every segment of society.

IRS Offers To Waive Late Fees, Negotiate New Payments For Taxpayers Snared By Recession

WASHINGTON — As the nation sinks deeper into recession, the IRS is offering to waive late penalties, negotiate new payment plans and postpone asset seizures for delinquent taxpayers who are financially strapped, but make a good-faith effort to settle their tax debts.

IRS Commissioner Doug Shulman said Tuesday that tax agents are being given new authority to work with victims of the nation’s economic woes who are struggling to pay their bills.

“We need to recognize that it’s an extraordinary, challenging time,” Shulman said in an interview. “We need to understand the taxpayers’ perspective. We need to walk a mile in their shoes.”

It’s unrealistic to expect some taxpayers to make timely payments in this economy, Shulman said. However, he cautioned that those seeking help will have to demonstrate their inability to pay. Those who fail to file tax returns, or who simply ignore collection notices, will not be eligible for help, he said.

“The most important thing for people to do is to get on the phone or walk into an IRS office,” he said. “The worst thing someone can do is go dark and not be in a discussion with us.”

Just last month, the agency announced a program making it easier for homeowners with an IRS lien on their property to refinance their mortgages or sell their homes.

With the filing season for 2008 tax returns opening this week, the IRS expects to process 250 million returns over the next few months, including 130 million from individuals.

The new leniency program is geared toward people who have paid their taxes in the past, but who are now having facing a financial hardship. “This is not a free ride for people who can actually pay their taxes,” Shulman said.

The IRS doesn’t know how many taxpayers might take advantage of the new program for stretching out payments on overdue taxes or even reducing their tax liability. But millions could be eligible.

In the fiscal year ending last Sept. 30, the IRS took enforcement action against more than 3 million taxpayers. The actions included property liens and asset seizures, including homes, cars, bank accounts and garnishing wages.

This year, even more taxpayers could fall behind in their tax payments as the economy continues to sour. Record numbers of homeowners are falling behind on mortgage payments and the U.S. economy is losing jobs at an alarming rate.

Since the start of the recession last December, the economy has shed 1.9 million jobs, and the number of unemployed people has increased by 2.7 million _ to 10.3 million now out of work.

The leniency program is an extraordinary step by the IRS, said Ellis Reemer, head of tax litigation at the law firm of DLA Piper. IRS agents, he said, are generally well-meaning public servants who want to work with taxpayers but are often bound by policies that limit their discretion.

“This is not a normal course of events,” Reemer said. “This is an institutional determination that we are in very difficult economic times.”

The program was described as the “give the tax man a heart plan,” said Steve Ellis, vice president of Taxpayers for Common Sense, a budget watchdog group.

Ellis said the program makes sense given the state of the economy, but he cautioned that it should be closely monitored for consistency and fairness.

“You don’t want people to get off the hook and not pay their fair share,” he said. “They need to make sure that it’s consistent.”

The IRS is doing the same thing many private creditors are doing. She said the mortgage crisis, Wall Street meltdown and job losses have left many families unable to pay their bills, said Sharon Price, policy director of the National Housing Conference.

However, she worried that many taxpayers won’t know how to access the benefits.

“The problem is, will it be consistent and how will people find out about it?” Price said.

To help explain the leniency program, the IRS has posted answers to common taxpayer questions on its Web site, . The advice under “What if I can’t pay my taxes?” begins with some reassuring words: “Don’t panic.” http://www.irs.gov

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On The Net:

IRS: ,,id201853,00.html?portlet6 http://www.irs.gov/newsroom/article/0

Paulson says changes needed at Fannie, Freddie (AP)

AP - Treasury Secretary Henry Paulson on Wednesday said the best option for the future of Fannie Mae and Freddie Mac could be for the mortgage giants to be run like public utilities.

Stocks in biggest fall in a month on jobs and tech (Reuters)

Reuters - Stocks suffered their worst decline in more than a month on Wednesday after a grim private-sector jobs report coupled with a revenue warning from top chip maker Intel Corp revived deep concerns about the economy.

Bed Bath & Beyond quarterly profit falls (Reuters)

Reuters - Home furnishings retailer Bed Bath & Beyond reported a lower quarterly profit, hurt by the soft U.S. economy and a major rival’s liquidation, and forecast earnings for the current period below Wall Street estimates.

Budget deficit to hit $1.2 trillion in fiscal 2009 (Reuters)

Reuters - The U.S. budget deficit will swell to a record $1.186 trillion in fiscal 2009, congressional forecasters said on Wednesday, the result of an economic recession that has cut tax receipts and caused massive government bailouts of banks and automakers.

Intel warns second time on quarter (Reuters)

Reuters - Microchip maker Intel Corp on Wednesday issued its second revenue warning on the fourth quarter, saying demand for personal computers was even worse than it feared and sparking wide concerns about tech companies.