Friday, January 9, 2009

Firing at the big firms has only just begun

We have all heard the ominous announcements regarding job cuts going into 2009. The ADP report paints an even scarier picture: it is unlikely that the labor market has internalized much the announced job cuts over the last few months; and the list is long.

The table to the left lists the Wall Street Journal's compiled job cut announcements for the fourth quarter of 2008 and the first quarter of 2009 (data through through January 8, 2009).

Notice that most of the announcements are coming from large firms, with likely more than 499 employees. The ADP report that was released on Wednesday revealed the following: that the December's estimated private payroll loss was concentrated in the small and medium-sized firms, with 1-49 and 50-499 employees, respectively. Large firms have cut payroll at a much slower rate.

Note: The ADP adds value - even though the estimated loss in private payroll, -693,000, was well
below the BLS' reported private nonfarm job loss, -531,000 - because the BLS report does not break down payroll by firm size, rather by industry.

The chart lists the monthly contributions to total ADP private nonfarm payroll growth from small (1-49 employees), medium (50-499 employees), and large (>499 employees) firms spanning the years January 2001 through December 2008. The contribution to payroll growth coming from the small and medium-sized firms is usually greater than that of the large firms. However, since September, there has been a big and negative drop in the payroll of these firms relative to the large firms.

The small and medium layoffs don't make the headlines. The job market could be quite bleak in 2009, when the larger firms start to cut into their workforces, as announced.

Rebecca Wilder

3 comments:

  1. Haven't many of the small and medium sized firms gone totally out of business? The empty store fronts are one indicator. The fact that they will not be around to hire after the turn-around is different than the larger firms who can ramp up hiring very quickly. This could be a problem.

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  2. We're seeing the results of building an economy on extended paper asset price rises through credit money (inflation) and a shift to massive Public Sector growth between 2001-2006 (government jobs, medical jobs, education jobs).

    This drove prices in both realty and things needed for living (gasoline, food).

    In short, Americans ran out of cash from income to service both debt (credit cards, home equity loans, mortgages) and to pay for living expenses (gasoline, food).

    The collapse in ADP reported employment shows what happens when an economy gets built on oligopoly markets concentration from so-called industry consolidation.

    In short, the Bush Era madness (Bush the Elder, Clinton the Illegitimate Son and Bush the Lesser) of corporate consolidation big business put too many eggs in one basket.

    All of this madness arose in the name of globalization, especially forced globalization on the peoples of the Middle East/Central Asia, with the push to scale for global competition.

    Americans need a true fix, to fix upon a new course.

    1) ban credit money growth from demand deposits

    2) only let credit money growth happen from money market accounts of one year or more

    3) take the Fed Res out of setting interbank lending rate (it should come from #2)

    4) break-up oligopoly markets players in banking, telecom, media, pharmaceuticals, electric power generation, grocery retailing, airlines, medical insurance, hospitals

    5) shrink the size of U.S. government and states governments by at least 50%

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  3. Without downward price flexiblity, economic downswings are not self-correcting. Unemployment creates more unemployment. Banks and other business failures, enormously accelerate and deepen the downswing. Since the economy lacks the capacity to rejuvenate itself, government intervention is inevitable. This has been the situtaion in the era beginning with the Great Depression

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