Q2 Corporate Earnings: Is 'Good' Good Enough?
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I'm J.R. Whalen in New York. Second quarter earnings won't be as strong as the first quarter, but corporate America will be just fine. We'll hear from the Herd on the Street team in a moment. First, these money headlines. Rising wages are beginning to eat into the profits of some U.S. companies. Average hourly earnings increased 2.7 percent in June from a year earlier, and they've risen at least 2.5 percent over 16 of the past 17 months.
What are the big Q2 earnings expectations compared with Q1's 26.6% growth?
That's good news for U.S. workers who've seen anemic wage increases over the past few years. and may benefit some businesses as consumers become more willing to open their wallets. But the higher costs pose a threat to some U.S. companies that are already facing trade-related tensions and a limited ability to raise prices to keep up with inflation. Speaking of wages, a survey by the mobile app and web platform Busy Kids says that many parents are inadvertently perpetuating the wage gap for children when they set rates for their seemingly trivial household jobs. Boys aged 5 to 7 years make 50% more in weekly allowance than girls in the same age group. The average boy makes $13.80 per week, while the average girl makes $6.71.
The survey of 10,000 users indicates that boys are also more likely to be paid for chores that have to do with basic hygiene, like showering or brushing teeth, while girls will do such tasks with less incentive. Although girls make less money than boys, they end up saving nearly the same amounts. Boys save an average of $24.98 per month, while girls save $23.49. And while the average worker between 25 and 34 stays in a job for 2.8 years, Pew researchers discovered as many as 22% of millennials in 2016 had been with their employer at least five years. That's longer than is expected for an age group that has a reputation for job hopping. And a Qualtrics Excel partner survey found that nearly 90% of millennials would agree to stay in a job for at least 10 years if they knew it offered annual raises in upward mobility.
This is your Money Briefing from The Wall Street Journal. Welcome back, everybody. The calendar reads the second week of July, and that means we are into earnings season. But while second quarter numbers are unlikely to match the strong 26.6 percent average growth we saw in the first quarter, heard on the street columnist Justin Layhart is here to say they'll still beat expectations. So, Justin, it sounds like when it comes to second quarter earnings, we can apply the adage good is good enough. Or is that too optimistic?
I mean, it's really good. I think, you know, what's been happening, there's been a lot of talk on Wall Street lately about an earnings deceleration so that the peak of growth was probably in the first quarter. And that's probably true. And it'll probably earnings growth will continue to deteriorate, you know, definitely next year. Once the the tax cut effects that really boosted earnings lately kind of calendar out. And that's a concern for people on Wall Street, because when earnings growth accelerates, it makes for a challenging environment for the market. But the thing is, is if you worry too much about it decelerating, you might miss how good this earnings season is likely to be. And probably much better than what analysts are, significantly better than what analysts are expecting right now.
Yeah, I was going to ask you, how much of the expected rosy second quarter earnings is the result of analysts who, you point out in your story, they typically set the bar kind of low?
Yeah, they always set the bar low. So you always expect that. You always expect that earnings are going to be better than what analysts think. In this case, it looks like they'll be more better. Yeah. They'll be more better. And there's a couple of reasons for that. One big one is if you just take a look at how many companies have been warning on earnings. So this is sort of the warnings period right before the earnings start to come out. And they've been really quiet. And usually what that means when you don't see a lot of warning activity that, hey, the quarter went really well for a lot of people.
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