Unemployment at 6.7% and Rising: Chemical Cos Hit Hard

With unemployment in the United States already at 6.7%, Dow Chemical (NYSE: DOW) has released a statement saying they are going to cut 5,000 full-time jobs and send 6,000 contractors packing. Merry Christmas.

As part of a program to reduce costs, Dow is permanently closing 20 of its plants and temporarily closing another 180. As CEO Andrew Liveris noted, "The current world economy has deteriorated sharply and we must adjust ourselves to the severity of this downturn." Dow hopes to cut costs by $700 million per year.

As we reported last week, DuPont Chemical is also putting 2500 jobs on the chopping block, and now 3M (NYSE: MMM) is joining the other two chemical producers by sending 1800 more to the unemployment lines as we head into the holidays. In total, roughly two million jobs have been lost during 2008. It seems unlikely that the pace will slow in early 2009, but perhaps by the end of the year we might see some stability in the jobs market. Although any such predictions remain largely speculative at this point, one thing we do know is that the incoming administration is planning on massive aid packages for the states to use in putting people to work rebuilding America's infrastructure. That means highways, bridges and the like will be jam-packed with construction crews this summer if the stimulus is passed.

We also know that many individuals may take the loss of a job as an opportunity to start their own businesses. While some of these businesses will fail, others will succeed and grow, adding workers as they do. In a year or two as these businesses get off the ground the economy should be in full recovery mode and making up for lost ground. This rising tide will inevitably carry some of these entrepreneurs to great heights.

Meanwhile, laid-off workers in Chicago have decided to take matters into their own hands. Indeed they have taken the entire factory into their own hands, staging a sit-in to protest being fired with only 3 days' notice and without what they claim is legally required severance and vacation pay. While the factory only employed about 250 workers before shutting down, it has become a symbol of the recession. Even President-elect Obama has commented on the situation. The New York Times quotes Mr. Obama as supporting the workers' actions, saying, "I think they're absolutely right and understand that what's happening to them is reflective of what's happening across this economy."

The privately held company, Republic Windows and Doors, has been hard hit by the construction slowdown. Prospects for at least the next six months left them little hope of a near-term recovery with mounting debt and creditors knocking at their doors. While, they could have, perhaps, handled the closing better, there was really no alternative to closing the business one way or another. The New York Times also reported that company owners would meet with the occupying workers as early as today to try to reach a settlement. I expect there to be plenty of shouting; watch the television news tonight for the most inflammatory of the sound bites.