“Heard in the Suite”—Emerging Trends: Four HR–Related Topics to Watch in Light of Obama’s Election

1. Under President-Elect Obama’s plan, more employers would be required to provide health care to employees or pay a percentage of payroll for a public system, increasing employers’ health care costs overall. Small employers would not be required to do this, but would receive a tax credit if they do.
2. If Obama expands the Family Medical Leave Act to cover smaller employers (25–50 employees), intangible costs of unpaid leave and guarantees of same compensation or benefits on return will be incurred. Talent management also becomes more complicated.
3. Obama supports the Employee Free Choice Act, which fosters union organization, and proposed changes could increase union membership and influence in organizations. This stronger union position will increase compensation costs for heavy union-labor organizations, many of which are already hurting from the economic downturn.
4. Obama wants the minimum wage to increase every year in step with inflation. Therefore employment costs for organizations using employees on minimum wage will increase faster than before if inflation occurs.

>Read More

Figures Just Released: Eurozone Announces First Ever Recession

Bloomberg, 14 November 2008

The European Union’s statistics unit reports a contraction in gross domestic product for the second consecutive quarter in the 15 countries that use the Euro. This marks the first recession since the single currency was launched almost a decade ago.

>Read More

Betting on New Routes Despite Downturn

Wall Street Journal, 13 November 2008

Even though international air travel fell 2.9% September, Delta is adding flights to Tokyo, African cities, and second-tier European markets to its overseas destinations. Delta is now the world’s largest airline, following last month’s acquisition of Northwest Airline Corp. Despite the current economic climate and declines in business and leisure travel, Delta says it “sees opportunities to find new places to fly to.”

>Read More

Our view: Countercyclical investments are a key way to separate winners from losers when we emerge from this downturn. Corporate Strategy Board research on more than 5,000 companies’ performance since 1990 shows that the most economically volatile periods give firms the best opportunity to outperform peers—or to make errors with lasting consequences. The spread between first and fourth quartile performance within an industry more than doubles in the bottom year of a downturn but takes nearly five years to fall back to its long-term, healthy economic level. Companies, such as Delta, that are in a position to make strategic bets while riding out the current uncertainty should certainly do so but must ensure it is part of a considered long-term strategy on which they have the capabilities to execute and not just because the opportunity is “too good to pass up.”

Should the Fed's Commercial-Paper Program Be Expanded?

Bloomberg, 13 November 2008

A group of companies, including Textron Inc., Home Depot Inc. and Honda Motor Co., are asking the U.S. Federal Reserve to buy short-term commercial paper with the second-highest debt ratings to help them meet short-term debt obligations. The Fed's program, set up last month, currently only takes the most highly rated securities, but lower-rated companies argue that they are disadvantaged and face difficulties due to the surge in borrowing costs.

>Read More

Hedge Fund Big Shots, Treasury Come Under Fire

The New York Times, 13 November 2008

The House oversight committee discussed the possibility of regulating hedge funds, revealing that the heads of five of the biggest U.S. hedge funds each earned at least $1 billion in 2007. Also on the Hill, a Senate panel questioned Treasury Secretary Paulson's big shift on the bailout plan and criticized his handling of the program.

>Read More

Our view: The very visible hand of regulators is likely to distort the invisible hand of the market for quite some time. Whatever anyone thinks about the merits of specific policy choices, governments are likely to stay involved in the financial sector longer then anyone anticipates and the consequences in terms of changing consumer expectations and behaviors will be significant and lasting.

Daily Capital Markets Review: Volatile Stocks Rebound Amid Unemployment News

This summary includes news items regarding global liquidity, the TED spread, commercial paper and T-bill rates, currencies and commodities, and corporate debt spreads and new issuances. If you would like to receive the Review after markets close (instead of the next morning), please click here.

>Read More