Investing
Bloomberg Hasn't Found The Newest Economic Indicator
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What does it mean that Aon Corp. (AON) is getting more calls from companies for compensation consulting? Well, according to a Bloomberg News story, the world’s biggest insurance broker sees this as a “great, early sign” of an economic rebound. The evidence backing this up is pretty thin.
A Bloomberg noted, companies rely on executive compensation firms to help them “attract and retain talent,” but not that’s all they do. As AON Hewit’s own website points out, companies also want to make sure that their compensation policies encourage executives to act in the firm’s best interest and not for their own short-term gain. Its clients also have access to the company’s Total Compensation Measurement data base of information of more than 700 companies and more than 2,500 business units. This helps companies make sure that their pay is within the norms of their industry.
Sure, AON’s business will benefit from Fortune 500 companies seeking to poach bigshot executives from one another. But there isn’t much evidence that this is happening to any large degree. AON Hewitt CEO Russell Fradin even told Bloomberg: “You’re not seeing a massive hiring, but you are seeing some level of hiring again.”
Much of Aon’s new business may be from companies looking to overhaul their pay practices in light of the new economic reality. Businesses probably need Aon’s advice in determining the least amount of money they need to spend to meet their hiring needs. None of these are particularly bullish signs for the economy.
Indeed, employers continue to hold all the cards in the hiring process. Unemployment hit a 26-year high of 9.7 percent in August. The jobs report due to be issued Friday is expected to be gloomy. A survey done by AON Hewitt that’s cited by Bloomberg found that companies are giving salaried workers raises of about 2.4 percent this year. That’s an increase from last year’s record low of 1.8 percent, but it’s no reason for workers to celebrate. There are plenty of unemployed people who will take lower compensation for a job than they would have before the economy went sour. They don’t need a consultant to tell them that.
The unprecedented nature of the economic decline has caused people to consider goofy ideas to figure out where the economy is heading. For instance, there is the Hot Waitress Index which argues that if restaurants are staffed with attractive servers that means the economy is soft because these people should presumably be working as models. This index apparently only works in New York and Los Angeles.
For investors, the lesson is simple: just because someone says they have a unique view on the economy doesn’t mean they do.
–Jonathan Berr
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