Massive IT redundancies to add to US job woes this week
Posted on 04 July 2011 with 6 comments from readers
After the Independence Day holiday the United States returns to markets where the Greek debt problem is subordinated and the focus of interest will shift to the ability of the US economy to create or destroy jobs.
ArabianMoney has heard of at least one major US IT company planning several thousand redundancies this week. It will likely not be alone. The demand for IT equipment has been faltering this year with the rise of the iPad delivering a 25 per cent blow to PC sales.
Profits and jobs
Falling demand means layoffs even for companies sat on multi-billion dollar cash piles. The money saved by sacking folk goes straight to the bottom line, and that is good for profits.
But then each worker that joins the dole queue is another consumer taken out of the mainstream economy and instead a burden on the state. It is a downward spiral and not a recipe for recovery.
On Friday we will get the latest US non-farm payroll data. Analysts will be watching for any improvement or increase in unemployment that is well above the official 9.1 per cent if the willing but unregistered and under-employed are included.
Not since the 1930s has the US faced a jobs crisis on this scale. It can be blamed on a loss of competitiveness and transfer of manufacturing to the Third World. It can be blamed on Americans living beyond their means and running up the biggest deficit in world history.
Yet what can be done about it? In time market forces will operate. Caterpillar is bringing its manufacturing back from China, partly because Chinese labor costs are now rising exponentially.
Market system
However, you cannot have a market-led recovery if you do not allow the market to function. That means allowing bankrupt businesses and banks to fail, and the reallocation of capital into new industries and growth areas of the economy.
The problem as ArabianMoney sees it is that the US has pumped money into the financial system like crazy to prevent the market cycle from taking its course, and this has most probably only delayed the inevitable shake-out at immense cost and much higher inflation.
Logically then the US financial markets are too high. They are pricing in a recovery that the jobs market says just is not happening. An adjustment in share prices to the downside would therefore seem on the cards, even if mass redundancies might be first greeted as good news for profits.
6 Comments posted by readers:
“the most reasonable supposition..it will not be so much different this time”..A$ july 3..what a difference a day makes!!..about time you came around..much to be loved here, & much forgiven..optimism belongs w/ theatre..government & investment banking deserve less
If ever there was a case of ‘the Emperors New Clothes’ being applied to a nation then the US is it. The whole world knows that they are effectively insolvent and that thier entire economy is literally, as well as metaphorically ‘on borrowed time’.
Just like the story of the ‘emperor with no clothes’ parading to his subjects, the whole world can see that the US is ‘naked’ – except for the US itself.
The answer to many of the immediate economic problems the US faces is just as simple as putting on a set of clothes – stop spending money you don’t have!
The main crux of this vast overspending as I see it is the US military machine. Basically the US cannot afford to maintain its global empire – latest figures showed that the US alone spends more on ‘defence’ than the whole of the rest of the planet does combined!
Like the drowning man who refuses to empty his pockets of all his gold and silver (even though he knows if he does not he will sink and drown) the US appears to have choosen not to release its grip on its global empire.
Very soon someone is going to shout out ‘but you are not wearing any clothes’. This will done by a mass dumping of the US Dollar as the global reserve currency and by commodities being priced by a ‘basket’ of international currencies causing domestic prices to skyrocket.
There is a word used to describe a drowning man who will not let go of his treasure even to save his own life, but I can’t quite remember what it is………
There will definately be a shift away from the PC as Cloud computing and further developments in mobile technology develop further and whilst this may cause redundancies in one area there is no reason to think they cannot be created in another…. whether these occur on US soil is another story.
Whilst many in the US complain about outsourcing in many cases it the US man in the street who is causing their own job losses.
Only yesterday I checked a website that lists job offers from people needing web services. – freeelance
On it was a US dentist wanting a new website and the bids came in from India, Bangladesh, Pakistan, China at a fraction of the cost of what a local web designer might charge .. good for the dentist and good for the sub-continent workers … but cannot a dentist not afford to employ a neighbour and fellow American ??
The US is dying from the inside on a downward spiral …. the line between being smart and being stupid is often a very fine one… the dentist may save himself a few dollars but what he may not realise is that those saved dollars are getting worthless as his actions lays off more fellow Americans who in turn will forego the dentists chair …
Happy Independance Day 2011 -
prescient comment Michael!..psychologically & emotionally, the human race has great difficulty w/ its own..as for the Old Man, anytime failed leadership in Wash DC or state capitals blames bankruptcy on social services, its time to load up on bank & war machine stock..America isn’t alone in its adoration
@ Peter, the Ed.:
“you cannot have a market-led recovery if you do not allow the market to function.”
Well said.
Since January 2009, there has been zero job creation in the USA, although the Obama administration loves to quote how they have “saved” jobs and the US Bureau of Labor Statistics (BLS) enjoys manipulating the jobs data to show that unemployment isn’t all that bad (but we all know that in the BLS job data, they will only count folks who are “actively looking for work” . . . but what about the other 12-14 million people who have given up “looking for work? Don’t they matter? Interestingly the “labor participation rate” is a more noteworthy yardstick, since it can not be manipulated, and this rate has been steadily declining for a long time now.
Zero Job Creation:
Here’s a very sobering commentary from Mort Zuckerman, who, like me, used to be a strong supporter of Obama. Here’s the link:
http://www.zerohedge.com/article/zuckerman-why-jobs-situation-worse-it-looks
In this commentary, he clearly shows that the US “jobs machine” has broken down completely; he adds that “the general mood of the US is one of alarm”. Quoting David Rosenberg, he states that “we may well be in the midst of a modern depression.” The worst part is that the Obama administration appears to be unwilling (or perhaps unable, due to incompetence) to do anything constructive about the plight of the US economy.
@ Michael: an excellent analogy (i.e. US dentist needs a new web site) about how US businesses, in their quest to save a buck, are unwilling to hire American talent to do the job. The US is indeed dying from the inside.
@ The OldMan: Enjoyed your remarks!
US refuses to release its grip on its global empire, and is deluding itself into believing the solution is simply to print more $100 dollar bills in the hundreds of billions each month.
It was the catch-cry of the computer sellers in the 80’s that “computers will make life easier and give you more leisure time”. And they were right.
What could be easier than not having to worry about going to work, and instead having 24 hour leisure? albeit without a pay packet.
Steve Wozniak is now saying we’ll all be pets soon… but who’s pet?