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Companies expect job losses in the final quarter of the year for the first time since early 2021.

The inflation crisis is already having its first serious consequences for economic activity and workers. Companies plan to cut jobs in the last quarter of the year for the first time since the beginning of 2021, according to a survey conducted by the Bank of Spain every three months on a sample of companies in our country.

A survey published by the institution showed that companies overall assumed that their turnover fell slightly between July and September, although in the second quarter they believed it would increase again, after a slowdown at the beginning of the year. Due to the recent impact of COVID, the halt of transport and the beginning of the Russian invasion of Ukraine.

The most affected sectors are agriculture, trade, construction and industry, as they are the most affected by the increase in energy costs, fertilizers and raw materials in general, which the war has historically put pressure on in recent months.

In contrast, with their earnings expected to improve, are the leisure and entertainment, hospitality and transportation sectors. According to the Bank of Spain, because “they benefited from the end of the restrictions related to the pandemic”. First of all, thanks to the first full tourist season since 2019.

destruction of work

With this “heterogeneity” among different businesses, the most worrying conclusion is that the group of surveyed companies indicates a decrease in employment in this last period of 2022. An expectation that was not so negative after the first quarter of 2021, anyway. In the worst moments of the pandemic for the economy.

Research offers data that explains this pessimism. Companies expect costs to rise, and not all of them are passed on to the final prices of the goods and services they sell.

Until June, the Bank of Spain itself recently noted that the turnover of non-financial companies has grown at a very high rate due to the recovery in activity and inflation, and that profits are already above pre-pandemic profits.

Although the institution’s quarterly balance sheet (which collects data on 920 non-financial companies) also finds large differences between sectors, it reflects that this evolution “translated into an improvement in the average profitability of companies. [la capacidad de convertir los ingresos en beneficios]”.

“A breakdown by sector shows that most branches recorded a recovery in profit (GVA) between January and June 2022, highlighted by the industry (48%), the retail and hospitality sector (25.4%) and the aggregate, which includes other activities (24.5%). ), within which the good behavior of transport companies stands out”, he explains.

“On the contrary, the power branch experienced a 9.4% drop in profit (GVA), an evolution that reflects the negative behavior of electricity trading companies, which in many cases could not fully influence their prices.” Increase in import costs,” the institution adds.

These differences mean that, if taken as a whole, the 920 quarterly balance sheet companies studied by the Bank of Spain are already 1.3% ahead of pre-Covid profits, across sectors, primarily industry and trade and hotels. In a specific energy segment, “Electricity Generators” do this by improving margins by up to 25 percentage points.

Salary increases

This information highlights the need to agree on wage increases in our country, taking into account the loss of purchasing power of workers and families, while certain companies improve margins, which is also seen on average as an increase in non-personnel costs (energy. raw materials, intermediate goods) in final, consumer prices.

In other words, companies are bringing in more and making more without raising wages, which is why unions are calling for wage increases and a broader wage deal that should include “retention of business profits, which means talking about taxation.” [como los impuestos a la banca y las empresas, o a las grandes fortunas]and protecting the most vulnerable, both in the energy market and in the mortgage and food markets,” as CCOO Secretary General Unai Sordo asserts.

The union’s proposal for wage increases still involves a reference frame for the next three years and safeguards to protect purchasing power during this cycle, but without doing so all at once to avoid a dangerous inflationary spiral.

ECB coup

In addition to destroying jobs and suffocating families, ECB President Christine Lagarde announced a 0.75% hike in key interest rates in early September, the largest in eurozone history, to 1.25%. Another increase since the first of July from 0.5% to 0%, representing a radical change in the monetary policy that has been maintained for years to facilitate the recovery from the great financial crisis of 2008 and to overcome the pandemic. later. Lagarde said she would continue to raise rates in the coming months.

This is the strategy adopted by the ECB and is based on cooling the economy with this increase in the cost of loans and mortgages. Of course, this is a measure that finds various criticisms. First, that the root of this inflationary crisis is in energy. The second is that the same price crisis for oil, natural gas and other raw materials was exacerbated by Russia’s invasion of Ukraine.

Neither crude oil nor gas are responding to tightening financing conditions. Ultimately, they will react to lower demand if the recession deepens, but even that won’t prevent the threat of gas cuts from Russia or the threat of cutbacks in the dictatorships that produce most of the oil. War, humanitarian and geopolitical issues will be much less affected by the increase in indicators.

Source: El Diario





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