When Goldman announced layoffs last week (3200 people, or 10% of its staff), it said there was no longer any place to hide.
Unemployment claims are increasing at a pace that has caught some economists by surprise, indicating that the real economy downturn is picking up momentum at a rapid pace. Because many jobs, even low-level ones, entail training in company specific procedures (just think of the computer-related activities), employer has seemed reluctant to fire staff, and some had cut hours rather than axeing them. Now many businesses apparently no longer have that luxury.
Layoffs have arrived in force, like a wrenching second act in the unfolding crisis. In just the last two weeks, the list of companies announcing their intention to cut workers has read like a Who’s Who of corporate America: Merck, Yahoo, General Electric, Xerox, Pratt & Whitney, Goldman Sachs, Whirlpool, Bank of America, Alcoa, Coca-Cola, the Detroit automakers and nearly all the airlines.
When October’s job losses are announced on Nov. 7, three days after the presidential election, many economists expect the number to exceed 200,000. The current unemployment rate of 6.1 percent is likely to rise, perhaps significantly.
“My view is that it will be near 8 or 8.5 percent by the end of next year,” said Nigel Gault, chief domestic economist at Global Insight, offering a forecast others share. That would be the highest unemployment rate since the deep recession of the early 1980s…..
Yves here. A very important point often missed in the discussion of unemployment figures is how they have been
degraded refined over the years, with certain types of workers that used to be included in the labor pool now excluded from the “headline” unemployment figure, known as U-3. U-6, another measure of unemployment that has the broadest measure of unemployment (“Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers”). One can debate whether that figure is too inclusive, but it is closer to how many EU members define unemployment than the widely-reported U-3. U-6 was 11.0% in September, while U-3 was 6.1%.
Back to the Times:
The broadening layoffs are most pronounced on Wall Street, in the auto industry, in construction, in the airlines and in retailing. The steel mills, big suppliers to many sectors of the economy, are shutting 17 of the nation’s 29 blast furnaces — a startling indicator of how quickly output is declining as corporate America struggles to adjust to the spreading crisis.
“We have seen a softening order book in the most dramatic ways in the last week,” said Tom Conway, a vice president of the United Steelworkers of America, adding that layoffs in the industry “are just starting now.”
In September alone, 2,269 employers each laid off 50 people or more, the Bureau of Labor Statistics reported, up sharply from the spring and summer months, and the highest number since September 2001, when the aftermath of the 9/11 attacks coincided with a recession to spook employers. A spike in 2005 was related to Hurricane Katrina.
The financial services industry has been cutting jobs since last summer, when the credit crisis took hold. By some estimates, 300,000 jobs will disappear from banks, mutual fund groups, hedge funds and other financial services companies before the crisis subsides — 35,000 of them in New York…
The current unemployment rate, 6.1 percent — up more than a percentage point since April — is still relatively mild by post-World War II standards. The highest level since the Great Depression, 10.8 percent, came in November and December of 1982 as the economy was shaking off a severe recession..