Layoffs Mount As Recession Gets Worse

The spate of nationwide layoffs continues. Companies announced cuts to more than 40,000 on Monday. Barry Ritholtz, CEO and director of equity research at Fusion IQ who writes about the economy at his blog, The Big Picture, says layoffs are likely to continue for some time to come.

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MICHELE NORRIS, host:

This is All Things Considered from NPR News. I'm Michele Norris.

ROBERT SIEGEL, host:

And I'm Robert Siegel. Read today's job cut announcements and you'd be tempted to call this "Black Monday." But nowadays, there seem to be any number of Mondays vying for that honor. Here's today's claim to bleakness - 20,000 jobs cut at Caterpillar, 8,000 jobs cut by Sprint Nextel, 7,000 at Home Depot, 8,000 job cuts expected from the merger of Pfizer and Wyeth, and 2,000 jobs at GM plants in Michigan and Ohio. That's 45,000 jobs in this country. And in Europe, there's also bad news: 7,000 jobs cut at the financial services company ING and 6,000 at the electronics company Philips. Well, joining us is Barry Ritholtz who founded the financial blog "The Big Picture." He's also a CEO at Fusion IQ, an online quantitative research firm. Mr. Ritholtz joins us from the NPR New York bureau. Welcome to the program. Forty-five thousand U.S. jobs cut in a day. What does that say to you?

Mr. BARRY RITHOLTZ (CEO and Director, Fusion IQ; Financial Blogger): Well, it tells us that we're going to continue to see some layoffs for some time to come. It's not just the job losses today. You look at the entire month of January and we're up to 150,000. And that means that we're in a very serious downturn in the job market that's likely to continue for the foreseeable future.

SIEGEL: And do those numbers tend to conform to expectations of policymakers or do they suggest a more dire and deep recession than they might have thought?

Mr. RITHOLTZ: I always take policymakers' expectations with a grain of salt. If you recall in - for most of 2008, most of the policymakers at the Federal Reserve and the Treasury Department were telling us that the housing issues were contained, the credit problems were contained, and that we'll, you know, hopefully avoid a recession. Their expectations tend to be very, very optimistic - overly optimistic. And that's the way it usually is.

SIEGEL: When you add to the announcement today by a company like Caterpillar and Home Depot, for that matter, last week's announcements of layoffs by Microsoft and Harley Davidson, we were talking about brands that connote quality in this country.

Mr. RITHOLTZ: Well, but these are brands that are not insulated from the broader economic cycle. If we're looking at Caterpillar, we're looking at a company that makes the bulk of its money through development of commercial and residential real estate. Obviously, both of those areas are doing very, very poorly. If you're talking about Microsoft and Intel or any of the other tech companies, we've seen some very, very bad earnings and a general warning from most of the people, most of the companies in this sector that things aren't going well. When was the last time Microsoft and Intel both announced layoffs of 5,000 people? We know PC demand is weak, mobile phone sales are poor, and discretionary consumer spending is weak. That means technology is going to suffer just like the rest of the economy.

SIEGEL: Well, what do you make of the layoffs announced in Europe by Philips, which doesn't make expensive discretionary things?

Mr. RITHOLTZ: You know, it's pretty clear that everybody is sitting down and looking at their bottom lines and their total revenue numbers and saying, gee, you know, we are going to be running at a negative rate of return. We have to get our costs down. You can't maintain the same workforce if you're putting out a hundred widgets when you're only putting out 50 widgets. So, they start cutting back where they can. And unfortunately, a lot of the cuts fall on the labor force. That's - you know, when you look at a box of cornflakes, the most expensive ingredient isn't corn or sugar, it's the labor that goes into it. And that's why it's the first place where companies look to start saving a little cash flow.

SIEGEL: Is there anything about job cut announcements that can tell us whether we are heading for the bottom of a recession, whether we're already at the bottom of the recession, or whether there is much, much worse to come?

Mr. RITHOLTZ: You know, the interesting thing about labor data is - and employment data is that it tends to very much lag the economic cycle. If you look at the past five recessions, layoffs and headcount reductions took place six to nine months into the recovery. So the strange thing about these big layoff numbers is that they very often occur even after the economy has bottomed and has began to move higher. So, unfortunately, you can't draw any specific conclusion that things are getting better, the economy is picking up, when based on the pace of layoffs. In fact, things will be getting better, and we'll still be seeing significant layoffs. At least that's what history has shown us.

SIEGEL: Mr. Ritholtz, thanks a lot for talking with us.

Mr. RITHOLTZ: Thanks for having me.

SIEGEL: It's Barry Ritholtz, who is the founder of the financial blog "The Big Picture."

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Major Firms Slash Tens Of Thousands Of Jobs

The list of companies announcing layoffs amid the deepening recession continued to grow Monday, with Caterpillar, Home Depot, Sprint, Royal Philips Electronics, drugmaker Pfizer and GM announcing they would shed tens of thousands of jobs.

The announcements coincide with a survey released by the National Association for Business Economics, or NABE, that shows the worst business conditions in more than a quarter century and the likelihood of many more job losses in coming months.

Caterpillar Inc., the world's largest maker of mining and construction equipment, said Monday that its fourth-quarter profit plunged 32 percent amid a global downturn in new building and demand for raw commodities. It will cut 20,000 employees, contract and agency workers.

The Home Depot Inc., whose business has been badly hit by plunging home values, said it would lay off 7,000 employees, or 2 percent of its work force. The Atlanta-based retailer will close its 34 Expo Design Centers and more than a dozen other stores. The company also plans to shed 2,000 nonstore jobs and freeze the pay of its officers.

Sprint Nextel Corp., the No. 3 U.S. mobile service provider, will cut up to 8,000 jobs, or about 14 percent of its work force, as part of a plan to reduce labor costs by $1.2 billion a year. Last month, Sprint's larger rival, AT&T Inc., said it would eliminate 12,000 jobs, or about 4 percent of its staff.

Philips Electronics announced it would cut 6,000 jobs.

General Motors Corp., which has already experienced deep cuts, will trim an additional 2,000 jobs at plants in Michigan and Ohio and is halting production for several weeks at nine plants over the next six months owing to slow sales, the company said.

Meanwhile, New York-based Pfizer announced a merger plan in which it will acquire rival Wyeth. It accompanied that news with the announcement it would cut 8,000 jobs as a result of a patent expiring on its top-selling cholesterol drug, Lipitor.

In its survey, NABE showed that 39 percent of businesses surveyed planned to eliminate jobs through attrition or "significant" layoffs over the next six months. That was up from 32 percent in an October survey. Around 45 percent in the current survey anticipated no change in hiring plans, while roughly 17 percent thought hiring would increase.

The report "depicts the worst business conditions since the survey began in 1982, confirming that the U.S. recession deepened in the fourth quarter of 2008," said Sara Johnson, NABE's lead analyst on the survey and an economist at IHS Global Insight.

Home sales were up unexpectedly in December, according to a report by the National Association of Realtors out Monday; however, prices continued to plunge. Sales of existing homes rose 6.5 percent. But the median price plunged to $175,400, down 15.3 percent from the year before.

As President Obama and his advisers were trying to sell a $825 billion economic stimulus package on Capitol Hill, the Federal Reserve was to meet this week in an effort to free up lending. But it's unclear what the Fed can do after exhausting interest rate cuts that are already near zero.

The Fed, which will issue a policy statement around 2:15 p.m. ET Wednesday at the end of a two-day meeting, is expected to repeat an assurance that rates will remain exceptionally low for some time and to issue guidance on how aggressively the Fed will keep supporting credit markets by expanding its balance sheet.

Meanwhile, Obama's economic team is working to overhaul its response to the worsening home foreclosure and bank crisis. Timothy Geithner, the president's nominee for Treasury secretary, told Congress last week that Obama would lay out his strategy in the next few weeks.

Obama said Monday that the nation cannot afford "distractions" or "delays" when it comes to the economic stimulus plan working its way through Congress. The government needs to act with a "sense of urgency," he said.

Obama said the job losses mean more working men and women "whose families have been disrupted and whose dreams have been put on hold."

From NPR staff and wire reports

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