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| Fears of a million layoffs a month in corporate America |
| 2008-12-08 |
| As many as a million American jobs could be lost every month by next spring as businesses struggle to raise capital in financial markets consumed by fear, according to a new analysis. November was the worst month in the US labour market since the oil crisis of 1974, as more than 500,000 US workers were laid off, according to official figures released on Friday. But Graham Turner, of consultancy GFC Economics, says the rising cost of corporate debt is now flashing a red warning signal that far worse is to come over the next few months and job losses are heading for levels last seen in the 1930s Great Depression. Corporate bond yields have rocketed since the credit crisis began as investors flee risky assets in search of safe havens such as US Treasuries. That effectively means many firms are being forced to pay eye-watering interest rates to borrow funds. Turner says when the gap between the yield on high-risk company bonds and US Treasuries widens sharply, unemployment tends to shoot up - and current credit conditions are pointing to a doubling in the pace of layoffs, to more than a million workers a month, by spring. 'The correlation is holding up all too well,' he said. 'It's very disconcerting.' He added that the pace of layoffs already happening in the US 'is indicative of panic'. During the 1970s oil crisis the panic was relatively short-lived, he says. 'But the worry now is that this will just roll on and on.' |
| Posted by:Anonymoose |
| #4 Note to Congress: as long as these layoff fears continue, i do not really expect a lot of people to be in a new car buying mood. It might not be a bad idea to think about that before you agree to hand that big ol' check to the Big 3. i know i have shoved my car buying thoughts back about 18 months or so. and fuggitabout the new RV. |
| Posted by: USN,Ret. 2008-12-08 22:06 |
| #3 Deflation does tend to lower money velocity which isn't a good thing. Cutting taxes on incomes and spending would be a good idea at this point. |
| Posted by: Bright Pebbles 2008-12-08 19:14 |
| #2 If you look around, there's a lot of readjustments going on. Some areas of the economy are not going to recover, particularly in areas like MSM [to paraphrase Seinfeld - not that there's anything wrong with that]. Some businesses operations that work at the edge or upon unique aspects of the economy are also going to suffer as currancy flows contract to what people believe and pay for as essentials. Some geographical areas will also be hit hard and take a long time to recover, if they do at all, because of embedded policies and laws that those in power are reluctant or unwilling to change. Adapt or perish. |
| Posted by: Procopius2k 2008-12-08 09:11 |
| #1 Why is this article comparing to 1974, anyways? The thing that caused the crisis then was oil prices skyrocketing, the opposite of what is occuring now. If energy prices stabilize or continue to fall, that could evaporate a lot of the added interest expense for companies, making things a wash. I do think there'll be more layoffs, but to predict these numbers right now doesn't make any sense. |
| Posted by: no mo uro 2008-12-08 08:59 |