How deep will job cuts get?


Unemployment in September was 6.1%. That is higher than the 5% or so where it was late last year. But it is not a recession level. During the downturn that began in 1973, the number was closer to 9%.

It is clear that the pace of lay-offs is accelerating. Xerox (NYSE: XRX) laid off 5% of its staff. Rumors are that Goldman Sachs (NYSE: GS) will cut 10%. Given that these companies are at different ends of the spectrum of the U.S. economy, the news speaks volumes.

According to Reuters, "As companies look at their prospects for the final quarter of the year and begin to see increasingly grim outlooks for 2009, they are cutting jobs from many different parts of their businesses."

Total employment in the U.S. is about 144 million people. That means if unemployment rise another 3%, another 4.5 million people could be out of work.

Leaving aside the human suffering, the amount of money the government would have to pay to support these people would be incredible. That number of people out of work would also increase foreclosures, credit card and auto defaults.

Looked at through the prism of the work force the recession is going to be very deep and very long.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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