Planned Layoffs Surge In July
Challenger says Planned Layoffs Surge In July
August 3, 2011: For the past three months, American companies have been cutting their workforce in increasing numbers, according to a new report from Challenger, Gray & Christmas, an outplacement consultancy group in Chicago. In July, the number of planned job cuts surged to a 16-month high of 66,414 — a 60 percent increase from June.For the record, last week's dip below 400K initial claims was revised up. It has been 17 consecutive week of +400K initial claims.
“We’re beginning to see patterns that are disconcerting, and the really troubling part is this: Nothing is happening in the economy which is going to boost job growth,” said Christine L. Owens, executive director of the National Employment Law Project.
With the exception of slight improvement last week, new weekly unemployment claims have topped 400,000 a week for more than three months — the level generally considered the dividing line between an improving labor market and a stagnant one. Likewise, the number of job openings dropped in June and July, according a firm that tracks online job postings. Another telling piece of the puzzle: The number of temporary workers — whose fortunes are closely watched as an indicator of employers’ future hiring intentions – dipped between May and June, according to the Bureau of Labor Statistics.
40,000 European Bank Positions Targeted
Marketwatch reports 40,000 positions are targeted; Swiss firms hit by soaring franc
A running tally of planned job cuts by European banks reached around 40,000 Tuesday, little more than halfway though earnings season, as firms that failed to control costs or were over-optimistic about growth make the deepest cuts.Most of those cuts are in Europe but a slowdown in Europe means a slowdown in US exports. Moreover, one can expect similar cuts in the US as soon as banks are forced to mark assets to market.
HBSC, Credit Suisse, Goldman Sachs, Morgan Stanley Announce Cuts
The New York Times reports HSBC to Trim 30,000 Jobs in Cost-Cutting Move
August 1, 2011: HSBC, the big European bank, said Monday that it was cutting 30,000 jobs, as part of a wide-ranging cost-cutting program to improve profitability.That 30,000 is part of the 40,000 reported above.
HSBC is the latest bank to announce job cuts amid regulatory uncertainty and global economic weakness. Credit Suisse said last week that it planned to eliminate 2,000 positions, or 4 percent of its jobs. Goldman Sachs and Morgan Stanley are also reducing their head counts.
Merck To Cut Up To 13,000 Jobs
The Wall Street Journal reports 2nd UPDATE: Merck To Cut Up To 13,000 Jobs, Reports 2Q Net Gain
Merck & Co. (MRK) said Friday that it would widen its cost-cutting measures by eliminating up to 13,000 jobs--on top of the 17,000 layoffs in prior actions--as the drug maker responds to generic competition and other challenges by shifting resources to emerging markets.I would be very surprised to see this "contained" to Merck. Should Congress do something rational, such as allow drug imports from Canada, there could be a bloodbath in pharmaceuticals.
Mexicans Return Home
The jobs situation in the US is so bleak in California, Mexican economy draws undocumented immigrants home
There are fewer undocumented immigrants in California – and the Sacramento region – because many are now finding the American dream south of the border.Mexican citizens returning home is a good thing. That they are returning home because of exceptionally poor economic conditions in the US is not.
"It's now easier to buy homes on credit, find a job and access higher education in Mexico," Sacramento's Mexican consul general, Carlos González Gutiérrez, said Wednesday. "We have become a middle-class country."
Mexico's unemployment rate is now 4.9 percent, compared with 9.4 percent joblessness in the United States.
An estimated 300,000 undocumented immigrants have left California since 2008, though the remaining 2.6 million still make up 7 percent of the population and 9 percent of the labor force, according to the Public Policy Institute of California.
One Million Robots to Replace Workers
Please consider Foxconn to replace workers with 1 million robots in 3 years
Taiwanese technology giant Foxconn will replace some of its workers with 1 million robots in three years to cut rising labor expenses and improve efficiency, said Terry Gou, founder and chairman of the company, late Friday.Manufacturing Jobs Vanish in "Creative Destruction"
The robots will be used to do simple and routine work such as spraying, welding and assembling which are now mainly conducted by workers, said Gou at a workers' dance party Friday night.
The company currently has 10,000 robots and the number will be increased to 300,000 next year and 1 million in three years, according to Gou.
Foxconn, the world's largest maker of computer components which assembles products for Apple, Sony and Nokia, is in the spotlight after a string of suicides of workers at its massive Chinese plants, which some blamed on tough working conditions.
The company currently employs 1.2 million people, with about 1 million of them based on the Chinese mainland.
People blame China for stealing jobs. While that is partially true, the bigger picture is "creative destruction".
Many manufacturing jobs are simply vanishing period. They no longer exist. Robots and technology do the work.
Flashback August 27, 2009: Creative Destruction
[My friend] BC writes:I do not know what Friday's jobs number will bring, but at this point, assuming it is good, it is more likely to be a last hurrah than anything else. My guess is for jobs to be under 100,000 and for unemployment to "unexpectedly" rise .2%.See chart 5 illustrating the conditions persisting during Japan's slow-motion, deflationary, debt-deleveraging depression from the mid-to-late '90s when the Japanese Boomer demographic drag and persistent price deflation took hold. I strongly suspect that we will experience a similar pattern between private and public debt/GDP.Schumpeterian Depression
We could see bank lending/GDP return to the 30% long-term average area from today's peak of 50-51% (and bank real estate loans/GDP of 27% vs. the long-term average 10-11%).
If so, we are likely to see little or no bank lending growth, which in a debt-money economy means little or no GDP growth and further mass-consolidation of capacity and debt defaults or gradual pay down.
Instead of "recovery" or "expansion", we should think in terms of a Schumpeterian Depression phase of the Long Wave trough, characterized as a debt-deflationary, deleveraging, demographics-induced no-growth regime.
Long-term 3.3% real GDP growth has decelerated to ~1.5%, and I expect average growth from the '00 peak to the mid- to late '10s to decelerate further to 1% or below.
The bottom line is that private debt-based growth is simply not possible, whereas any "growth" we do experience will be as a result of incremental government borrowing and spending, most of which will be in the form of war spending, bailouts, and social service transfers at very low GDP multiplier.
Inquiring minds might be interested in concepts like Creative Destruction.The economic concept of creative destruction was first introduced by the Austrian School economist Joseph Schumpeter.
Theory and Examples
Companies that once revolutionized and dominated new industries – for example, Xerox in copiers or Polaroid in instant photography – have seen their profits fall and their dominance vanish as rivals launched improved designs or cut manufacturing costs. Wal-Mart is a recent example of a company that has achieved a strong position in many markets, through its use of new inventory-management, marketing, and personnel-management techniques, using its resulting lower prices to compete with older or smaller companies in the offering of retail consumer products.
Just as older behemoths perceived to be juggernauts by their contemporaries (e.g., Montgomery Ward, FedMart, Woolworths) were eventually undone by nimbler and more innovative competitors, Wal-Mart faces the same threat. Just as the cassette tape replaced the 8-track, only to be replaced in turn by the compact disc, itself being undercut by MP3 players, the seemingly dominant Wal-Mart may well find itself an antiquated company of the past. This is the process of creative destruction.
Other examples are the way in which online free newspaper sites such as The Huffington Post and the National Review Online are leading to creative destruction of the traditional paper newspaper. The Christian Science Monitor announced in January 2009 that it would no longer continue to publish a daily paper edition, but would be available online daily and provide a weekly print edition.
The Seattle Post-Intelligencer became online-only in March 2009. Traditional French alumni networks, which typically charge their students to network online or through paper directories, are in danger of creative destruction from free social networking sites such as Linkedin and Viadeo.
In fact, successful innovation is normally a source of temporary market power, eroding the profits and position of old firms, yet ultimately succumbing to the pressure of new inventions commercialized by competing entrants. Creative destruction is a powerful economic concept because it can explain many of the dynamics of industrial change: the transition from a competitive to a monopolistic market, and back again.
Creative destruction can hurt. Layoffs of workers with obsolete working skills can be one price of new innovations valued by consumers. Though a continually innovating economy generates new opportunities for workers to participate in more creative and productive enterprises (provided they can acquire the necessary skills), creative destruction can cause severe hardship in the short term, and in the long term for those who cannot acquire the skills and work experience.
Regardless, consumers have tossed in the towel, most of Europe is in an outright recession right now, and the US is headed for a recession if not in one now. Global stimulus has worn out. It always does.
No structural problems have been fixed by central bankers, they just bailed out the banks and the bondholders at the expense of taxpayers, sending taxpayers deeper into the hole.
There is no reason at all for businesses to want to expand in this environment, so they won't. That's all you need to know.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Posts
