If you work in an organization, it looks like you'll be a big fat target for your headcount-cut-hungry bosses this year. That's because the economy is contracting fast -- many expect GDP to have slumped 5.4% in the fourth quarter of 2008. And those economists see GDP shrinking 4% this year. That means job losses not seen since 1982 (as I posted last week, these forces led to 40,000 layoffs on one day earlier this month).
How bad? The National Association for Business Economics (NABE) surveyed 105 corporate economists between December 17 and January 8 and found that 84% of them expect their employers to either cut significantly or make no change in its headcount. Specifically, the surveyed companies had the following to say:
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Job reductions through attrition or significant layoffs (39%) -- up from 32% in the previous survey it conducted in October 2008
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No change in employment (45%)
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Hiring (17%)
These forecasters are reporting customer demand dropping, capital spending reductions and shrinking profit margins. These reports are symptoms of a deflationary spiral which, as I posted, works as follows:
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Excess inventory,
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Price cuts,
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Capacity and job reductions,
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Less spending power,
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Lower demand -- followed by a return to step 1.
This cycle is tough to stop artificially. That's because in some ways it's a healthy way of getting rid of the excess created by the debt bubble of the last eight years. President Obama's $825 billion stimulus plan includes provisions to help people with the pain of this deflationary spiral.
But as long as the U.S. economy depends on consumer spending for growth, GDP will not resume an upward climb until consumers feel that they have enough extra money to buy more goods and services. That means that you have a better chance of losing your job in 2009 than in many many years.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. Portfolio recently published his eighth book, You Can't Order Change: Lessons From Jim McNerney's Turnaround at Boeing.
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Reader Comments (Page 1 of 1)
1-26-2009 @ 10:37AM
TX CHL Instructor said...
It's possible that I may lose one of my jobs, but I learned long ago never again to depend on a single source of income. Right now, thanks to the Chicago Politician with the Blank Resume, my Texas CHL business is booming, and I'm making hay while the sun shines by increasing my course offerings to as many as I can physically handle. Because if the Libs have their way, they will implement the same flawed policies used by FDR to convert a sharp recession into a global financial disaster.
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www.chl-tx.com
1-26-2009 @ 11:36AM
BHarrison said...
As a consult in the construction industry, basically I and the vast majority of other professionals in the industry are, in essence, "out of work" . . . there are basically NO new construction projects to a SUBSTANTIAL DEGREE. There are a few piddlings construction projects; but nothing significant to support the vast majority in the industry . . . and this will continue for the next 3 to 5 years until the excess inventories are absorbed; meanwhile, there is certainly no demand or rationale for significant new projects.
Add to this the fact that the surpluses in housing and in commercial buildings are increasing with foreclosures and business failures/shuttings. This situation is not going to "bottom out" for three to five years, and perhaps even longer; and recovery thereafter is going to take a long time also.
The USA of yesterday is GONE . . . that isn't being "negative"; that is merely a financial FACT.
The pivotal issue that will determine recovery will be whether Congress issues prudent and reasonable regulations and oversight to INSTILL INTEGRITY in our economic system by requiring FULL DISCLOSURE and TRANPARENCY in corporate finances.
There has to be reasonable faith and confidence in the financial reports of the cororations. "Creative accounting practices" must be outlawed for the FRAUDS that they enable and perpetuate. Auditing firms MUST BE held legally responsible and liable for the integrity of their work. All major corporations must be required to have audited on an annual basis AND with changes in auditing firms every year or two to prevent collusion.
"INTEGRITY" in our business enterprises and financial accounting is THE PIVOTAL ISSUE needed for the start of recovery . . . and that wll ferret out the remaining hidden frauds to "bottom out" these economic problems.
Without INTEGRITY, effective recovery is impossible.