By Don miller
The unemployment picture took on an even more ominous tone this week as new layoffs emphatically underscored a worsening global economy. Now, fear is rising that the losses represent a major restructuring in the business world and that some, if not most, of the jobs are gone forever.
The gloomy start to the workweek quickly turned into a bloodbath as more than 75,000 jobs were lost in a single day, when a who's who of U.S. household names launched a gauntlet of layoffs:
● Sprint Nextel Corp. (S), the wireless phone carrier said it is eliminating about 8,000 positions in the first quarter.
● Caterpillar Inc. (CAT), the world's largest maker of mining and construction equipment, is in the process of shedding about 20,000 jobs.
● Home Depot Inc. (HD) the home-improvement retailer said it was closing four small business units, trimming about 7,000 jobs in the process.
● General Motors Corp. (GM) said it will cut 2,000 jobs at plants in Michigan and Ohio.
● Texas Instruments Inc. (TXN), which makes chips for cell phones and other gadgets, said it will axe 3,400 jobs.
● And Corning Inc. (GLW) is cutting 3,500 jobs.
It was a stark reminder of how rapidly the recession is claiming jobs. Already 170,000 jobs have been lost in January. The U.S. economy lost 2.6 million jobs in 2008.
Moreover, a growing number of economists say the U.S. has only reached the halfway mark of job losses expected for this recession.
"Some of the worst job losses are ahead of us, not behind us," Wells Fargo & Co. (WFC) senior economist Scott Anderson told USA Today.
Anderson expects 3 million Americans to lose their jobs in 2009. Approximately 2.6 million were cut last year – the most since 1945, the final year of World War II. The layoffs are happening in "all industries in all areas of the world," Anderson says.
The worst news, though may be that the U.S. economy is not just shedding jobs temporarily, but is undergoing a fundamental restructuring process that will eliminate some types of jobs for good.
"They [represent] structural, not cyclical, changes to the economy," Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland told BusinessWeek. "We're looking at a permanently smaller economy with prolonged unemployment at an unacceptable level."
Morici says that housing, real estate, automobiles, finance, and retail sectors are resetting to "permanent lower levels" of employment.
Mike Montgomery, an economist with IHS Global Insight, asserts that many jobs in autos, manufacturing, apparel, and textiles aren't coming back. Those industries "have been in a long-term decline, and the recession is knocking them out."
Jobs began disappearing in home building and mortgage operations early in the recession, then across finance and banking more generally. Now the ax is falling across large swaths of manufacturing, retailing and information technology sectors.
The news ratchets up the pressure on the Obama administration and Congress as lawmakers debate an $825 billion stimulus package intended to save or create millions of jobs.
"These are not just numbers on a page," President Obama said citing the layoff announcements in remarks Monday. "As with the millions of jobs lost in 2008, these are working men and women whose families have been disrupted and whose dreams have been put on hold."
The House of Representatives will vote on its version of the bill today (Wednesday), and Senate committees will begin pulling together a companion bill this week.
But Obama's stimulus package is based largely on an estimate that the unemployment rate will rise to between 8% and 9% this year, according to the proposal summary from the House Appropriations Committee. If unemployment soars into double digits, as some economists expect, the financing may not be enough.
Many economists see the nationwide jobless number rising to at least 9% this year, possibly reaching double digits in 2010. Thirteen states are already above the national average of 7.2%, with Michigan (9.6%), Rhode Island (9.3%), California (8.4%), and South Carolina (8.4%) topping the list.
But as Money Morning reported Monday, the government's recently released official unemployment number of 7.2%, already vastly understates the number of jobless Americans because it fails to account for "discouraged" and "unattached" workers who have given up even looking for work.
Our research further indicates that if the number included unemployed farm and self-employed workers, "real" unemployment levels would approach 18%.
Whatever the unemployment number is, the new administration's stimulus plan is the only glimmer of hope for newly laid-off workers.
While stimulus spending on public works may take some time to get going, some companies could bring back displaced workers quickly if the government initiative generates new orders.
And because many businesses were already operating with a lean workforce when the recession began, there is some hope they will fill vacated positions when the economy improves.
"The vast majority of the job loss is strictly short-term," said Global Insight's Montgomery. "When consumer demand and sales come back, the jobs will come back."
But as Univeristy of Maryland's Morici contends, many companies may not rush to increase staffs even if business begins to pick back up.
"We are very early in the cycle," he said. "We are going to see the fury of the Old Testament for what we have done to the economy."
News and Related Story Links:
- Business Week:
A Red-Letter Day for Layoffs
- Money Morning:
The Obama Blueprint for Solving the U.S. Financial Crisis
Bloody Monday: Over 71,400 jobs lost