It was bad enough when your neighbor lost his home to foreclosure. But now things are really getting scary: Your own job may be at risk.
Unease turned to panic on December 5th after the government reported that the U.S. economy lost 533,000 jobs in November, making it the worst month for employment since the grim days of December 1974. The holiday party chatter is all about layoffs.
Forecasting job losses is incredibly difficult because a lot depends on when banks finally get back to the business of providing credit. The recent news on that score is not good. On December 9th, the Treasury Dept. auctioned one-month bills at 0.00%--evidence that risk aversion among potential financiers is more extreme than ever.
If the financial system keeps struggling, the spiral will continue: Cash-strapped companies will be forced to step up layoffs, causing cutbacks in consumer spending that will push employers to cut even more jobs. "I've been cautioning everybody that as long as financial conditions are as impaired as they are, questions about when the job market will hit bottom are premature," says Robert V. DiClemente, chief U.S. economist of Citigroup in New York.
Much depends on Washington's effectiveness in sustaining demand as the credit crunch unwinds. No matter what government does, the bleeding in the labor market is far from over.
The recession isn't all bad: Unsupported debts are being erased. Consumers are rebuilding their savings and lowering their living standards to match reality. Workers are exiting dying industries. And through distress sales, foreclosures, and bankruptcies, assets are being taken away from weak hands and given to strong ones, creating the conditions for future growth.
Source: BUSINESSWEEK, December 22, 2008