Merck to Cut Thousands of Pharma Jobs; Profits of Merck Increase; Meanwhile Washington Engaged in Herculean Effort to Raise the Debt Ceiling

How Will That Help?

Merck, the large pharmaceutical company announced that they will be cutting a significant portion of their workforce.

Merck & Co. will eliminate up to 13,000 jobs, about 14% of its work force, in the latest cost-cutting effort by a big drug maker coping with an aging product lineup.

The drug giant said the layoffs would be in addition to some 17,000 job cuts already planned and would cut spending by an extra $1.3 billion when finished at the end of 2015. Also contributing to the savings are the closings of unspecified offices and manufacturing plants.

Now the reason for this is not the weak overall economic conditions, although that is certainly a factor.  No what is going on here is that companies like Merck have found that they can increase profitability by greater productivity, and in a stagnant market that means job losses.  Merck’s profit picture is pretty nice.

For the quarter, Merck reported a profit of $2.02 billion, or 65 cents a share, up from $752 million, or 24 cents a share, a year earlier. Revenue increased 7% to $12.15 billion, led by sales jumps for diabetes drugs Januvia and Janumet, as well as anti-inflammatory drug Remicade.

The company raised the lower end of its per-share earnings forecast for 2011 by two cents and now expects $3.68 to $3.76, while affirming its revenue guidance of growth in the low to mid- single digits from $46 billion in 2010.

One can easily see how the Republican priority of cutting corporate taxes is important here.  Well one can see that if one is a Republican, the rest of us are going to have trouble seeing that rationale.

This profit picture illustrates the business climate in the U.S. as of mid 2011.  Corporate profits are soaring, as companies lay off employees, and the lack of consumer spending and investment overall means these employees have a difficult time finding employment at the same wage level as their previous jobs.  The companies are not to be blamed, they are doing what they are supposed to do.  Economic policy is at fault here.

At first glance this chart would seem to show job growth in the pharmaceutical industry.  It does not, it shows the number of layoffs per year for the last decade. Not a pretty picture.

Meanwhile in Washington Republicans were marching the country on a path to default on its debt, shut down federal government operations and create a huge disruption to the economy.  When asked about job losses, a Republican spokesman said “we are not really worried, we think most of our House members and Senators will be re-elected”.