Employee Productivity Is Worse Than It Appears
I’ve been hammering the US Retail industry for excess SG&A cutting. This analysis suggests that it might not be cutting enough.
It’s easy to look back at the past 5 or 10 years and nitpick the changes in retail employee productivity. But Zach went back to the Johnson administration to see how these trends have ebbed and flowed since the late 1960s through today. The answer? Yes, overall productivity is certainly higher, as it should be given inflation and technology’s impact on productivity. But over 40 years, the year/year trend has only gone negative 3 times before the current recession – and the math adds up in a way such that the erosion in the preceeding 3 periods combined just about equals what we’re looking at today.
What does this mean? How does it tie into a stock call? I’m really not YET sure. But I know that I’ve been hammering the US Retail industry for excess SG&A cutting over the past six months. This analysis suggests that either 1) perhaps the industry has not even cut enough SG&A (polar opposite to what I thought), or that 2) the revenue hit was truly more massive and perhaps anomalous than I gave it credit for.
I’m gonna stew on this one…but in the interim I figured I’d throw it your way in case you’d like to do the same.