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What to learn from this season’s earnings

John Dimsdale Apr 19, 2012

Jeremy Hobson: The corporate earnings reports are flooding in this morning, with companies like Southwest Airlines and Verizon telling us how they did in the first part of this year. In recent quarters, companies have padded their profits by cutting costs.

But as Marketplace’s John Dimsdale reports, that is starting to change.

John Dimsdale: After the markets closed yesterday, Yum Brands, better known as KFC, Pizza Hut and Taco Bell, turned in a strong quarter — thanks especially to lots of chicken sales in China. This morning, Bank of America reported lower profits, as the big bank’s debts from the financial crisis continue to weigh on earnings.

Microsoft issues its quarterly report later this afternoon. The software giant hasn’t kept up with the transition from desktop computers to smartphones and tablets. Profits are expected to be smaller than last year’s.

But Richard DeKaser at the Parthenon Group says overall, this week’s earnings reports show companies are beginning to spend more money on hiring workers.

Richard DeKaser: We’ve had spectacular profit growth during the first two years of the economic expansion and we’re beginning now to see a transition. We’re seeing profit growth slow as increasingly we should see rising shares of national income going to employee compensation.

And with more spending money in their pockets, DeKaser says consumers should help extend the economic recovery.

In Washington, I’m John Dimsdale for Marketplace.

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