We'd Better Brace for Massive Layoffs

Main Street and Wall Street both better be bracing for layoff because they are coming. (I talked about that a bit in Jobs Contract 9th Consecutive Month.)

Mass Layoffs Rise

One measure of future unemployment can be found by looking at mass layoff announcements. These are layoffs that have been announced, and are coming down the road, but are not yet reflected in the unemployment numbers. Please note that U.S. September Job Cuts Rise 33% From Year Ago, Challenger Says:

Job cuts announced by U.S. employers climbed 33 percent in September from a year earlier, led by reductions at computer- and automakers, according to a private placement firm.

Firing announcements rose to 95,094 last month from 71,739 in September 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today. Hewlett-Packard Co., the world's largest computer-maker, said last month it would eliminate 24,600 jobs, accounting for much of September's increase, Challenger said.

Economic data continues to suggest the credit crunch has reached critical mass and is rapidly picking up steam. Unemployment is poised to soar still higher. There is no driver for jobs, nor will the misguided $700+ billion bailout plan of Paulson provide any.

Bracing for U.S. Corporate Budget Cuts

BusinessWeek is is talking about Bracing for U.S. Corporate Budget Cuts:

William P. Lauder was already adjusting his corporate budget for a tough holiday season. Then the financial crisis hit. Amid the turmoil, the Estée Lauder Cos. (EL) chief executive stopped at a Denver mall and found it practically empty. Now he's preparing for the worst. "We always do scenario planning, but not to the degree that we are doing now," says Lauder. He's asking each brand manager at the New York cosmetics giant three questions: "What must you have? What would you like to keep going? And what can you give up?"

Faced with squeezed credit and unpredictable sales, U.S. companies are bracing for budget cuts that could be far-reaching, painful, and in some cases unprecedented. Even before September's turmoil, Moody's Economy.com predicted that corporate operating expenses—a proxy for budgets—would rise, on average, no more than 7% annually through 2012 across 59 industries, down from several consecutive quarters of double-digit gains. ...

Faced with such instability, some executives feel it's more prudent to jettison troubled businesses than to fix them. Consumer - product maker Newell Rubbermaid (NWL) now plans to dump $500 million of low-margin products, such as $10 plastic garbage cans, reversing a previous plan to turn them around. Newell CEO Mark D. Ketchum says it's the best strategy, given the tough road ahead. "Two words come to mind when I think of 2009—difficult and volatile," says Ketchum.

The most painful trim, of course, is in payroll. Many executives expect layoffs to be swifter and deeper than before, accompanied by pruned salaries and bonuses for those who remain.

Shotgun Marriages and Bankruptcies

The recently announced shotgun marriages and bankruptcies are going to cost tens of thousands of high paying and or high benefit jobs. Here is a partial list.

• Merrill Lynch (MER) and Bank of America (BAC) merger.
• Lehman bankruptcy
• Washington Mutual and JPMorgan (JPM)
• Citigroup (C) and Wachovia (WB), OR Wells Fargo (WFC) and Wachovia (WB)

Expect to see more mergers, more bankruptcies, and more layoffs as a result of mergers and bankruptcies.

Hewlett-Packard Co. (HPQ), the world's largest computer maker, fired a massive warning shot announcing it would eliminate 24,600 jobs, signaling it will not be just financial activities that are affected.

This holiday season is going to be a dismal one. Expect to see reduced profit margins and cutbacks in hours worked between now and Christmas. Those who supplemented income by working two jobs or by working overtime during the holiday season will find reduced opportunities this year. Expect to see more store closings in January as the shopping center economic model continues its slow death.

Commercial real estate, the last main bastion of job creation, is now crashing. There is no other source of jobs other than health care, and health care alone cannot fuel this economy.

Brace for massive layoffs as they are coming.

Comments

[moonbat1775:]

Let's see. We've tried regulating a corrupt and unstable banking system and that stifled innovation. We've tried deregulating a corrupt and unstable banking system and that has led to the current crisis.

Gee, is it possible that an honest banking would require little regulation and also be stable?

2008 Oct 06 12:51 PM

[whidbey:]

Suppose that unemployment rose significantly, and that most firms were pushed into reevaluating their capital/labor ratios, and decided to use technology in lieu of employees. It would lead to massive gains in efficiency and likely be the mother of a new birth of creativity and competitiveness. This is a disconnect that may be the start of a major reconstruction of the US, Western economy. Not EU because they have labor laws that forbid change, but say in China, Brazil and the USA. There is an real opportunity here, celebrate it!

2008 Oct 06 02:27 PM

[moonbat1775:]

"and decided to use technology in lieu of employees." Whidbey

Sure, and to finance this new technology the companies can go to the banks for loans, the banks will create new money and loan it out thereby creating inflation. In effect, the banks and the companies will loot the general populace and workers so that the worker's jobs can be eliminated. Sounds fair to me.

2008 Oct 06 02:55 PM

[billddrummer:]

This is too depressing for me.

2008 Oct 06 03:36 PM

[Still Renting:]

Whidbey, I think in the long run that is true. But in the short run, who is going to buy the cool stuff?

2008 Oct 06 07:04 PM

[ophiacus:]

So much for the notion of a service based economy. Why doesn't China supply the $700B for the bailout.

2008 Oct 07 11:11 AM

[Econ 101:]

Ophiacus,

China will be supplying that $700, by way of buying up land, homes and businesses in the US. They will install their own people and ignor those 100 million illiterate Americans

2008 Oct 07 11:21 AM

[carey_jim:]

In America, unemployment is not a problem unless you are laid off yourself.

Not a pretty idea but true.

"Can you spare a dime?"

2008 Oct 07 12:33 PM

[moonbat1775:]

Econ 101,
How can there be illiterate Americans when we spend the most for education? It's a miracle, ain't it?

2008 Oct 07 12:51 PM

[Valentin B.:]

It is not inevitable that unemployment affects 2.6 million of people around the world; opinions from different experts predict 2 million more will be lost this year. Lots of companies, including Hertz, Honda, Motorola and Circuit City have made or will make huge jobs cuts. At Advanced Micro Devices, the remaining employees may end up needing payday loans because everyone is taking pay cuts. For this very reason lots of company were also cutting about 1,100 jobs. Looks like it's getting pretty rough out there. Unemployment is already at a 26-year high and it's climbing every day. To read more about this, visit your <strong>payday loans<strong> source.

Jan 27 03:32 AM