The Recession Gathers Speed...
I say that the NBER Business Cycle Dating Committee should decide this week whether the recession began in November or June. I don't see how waiting any longer will give us any more information useful in deciding between those two dates. And I don't see any justification for waiting--other than that perhaps one does not want to announce a recession call just before an election.
Yves Smith:
Real Economy Crunch Arrives: Layoffs Rise Sharply: 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...
Christopher Rugaber:
Unemployment Claims Rising Faster Than Expected As Recession Deepens: Goldman Sachs, Chrysler and Xerox all announced they were cutting workers by the thousands, adding to the woes of an economy beset by tighter credit and wobbly banks.... The Commerce Department will release its first estimate of third-quarter economic performance Oct. 30, and Wall Street analysts project it will show the economy contracted by 0.5 percent, according to Thomson/IFR. Many economists expect the decline to continue into the current quarter and the first three months of 2009, if not longer. The classic definition of a recession is at least two consecutive quarters of negative growth. Former Federal Reserve Chairman Alan Greenspan, testifying before a House committee, said he could not see "how we can avoid a significant rise in layoffs and unemployment"...
Louis Uchitelle:
Spending Stalls and Businesses Slash U.S. Jobs: 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. Companies are laying off workers to cut production as consumers, struggling with their own finances, scale back spending. Employers had tried for months to cut expenses through hiring freezes and by cutting back hours. That has turned out not to be enough, and with earnings down sharply in the third quarter, corporate America has turned to layoffs.
“People have grown very nervous,” said Harry Holzer, a labor economist at Georgetown University and the Urban Institute, tracing cause and effect. “They have seen a lot of their wealth wiped out and as they cut back their spending, companies are responding with layoffs, which hurts consumption even more.” The unemployment is widespread, with Rhode Island the hardest hit. For Dwight and Rochelle Stokes of Phenix City, Ala., the layoffs are a family event. He lost his job two weeks ago as an aviation mechanic at the Pratt & Whitney jet engine facility near his home — a few days after his wife lost hers as a cosmetologist at Great Clips, a family-owned barbershop and beauty salon. “It got really slow in July and August,” Ms. Stokes said. “I would sit there for two hours, and some days we had only 10 clients, four of us for 10 clients.”
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...
