Accelerating Unemployment !!

When crisis happens, consumers start to use the “wait-and-see approach”. They do not spend money on goods and services then the companies face declining sales. In order to keep their margins, they tend to reduce scale of production, reduce operating costs, etc. to survive. One of those is to reduce expenses on labor force, so CEOs start to lay-off employees.

Who are the employees? They are “Consumers”. But why consumers lose confidence in market performance? The answer is, maybe policy taken by government can not lead to financial stability. Then the question is “Why can it not be achieved?” One of the right answers is “consumers and producers do not smoothly interact with each other.”

So, who is (are) the wrongdoer(s)? My answer is “ALL OF THEM”.

Adams

The author wishes to inform that President-elect Obama`s public works project will be introduced later. Then he is going to raise some arguments by specialists and his own ones against those plans to deal with the global financial crisis in the up-coming posts.

Nobody desires or satisfies with the financial crisis that ruptures worldwide and spread to virtually every corner of the whole economy. But world leaders just set the right policy at the wrong time, they just could not remedy it with minimum possible negative effects on the economy, as a result of what they are doing and will do in the near future.

From day to day, the crisis escalates to the next level, and job losses are spreading far beyond the housing and finance sectors to every edge of the global economy. Companies are now shedding workers at an accelerating rate, some in response to declining sales and others in anticipation of tougher time ahead.

The government`s report of a giant job losses in November, the biggest monthly decline in a generation. The nation`s employers cut 533,000 jobs in November, the Bureau of Labour Statistics reported Friday (December 5).

“We are caught in a downward spiral in which employment, income and spending are collapsing together,” said Nigel Gault, chief domestic economist for IHS Global Insight. “With private spending frozen, we have no choice but to rely on a stimulus package to revive the economy.” he commented on what to do about the crisis.

The Business Roundtable, which represents 160 big U.S. companies said Thursday that 60% of CEOs in a recent survey expect to lay-off employees in coming months, increased from only 1/3 projected job losses. “As economic conditions continue to soften, so have our member CEO`s near-term expectations for sales, capital spending and employment,” Harold McGraw III, Business Roundtable Chairman and also chief executive of McGraw-Hill Cos told reporters.

The unemployment rate rose to 6.7 percent, up six-tenths over the last three months. More than 420,000 people who had been working or seeking in October left the labor force in November. More significantly, if those too discouraged to apply for a job any longer or those working fewer hours than they would like is included, the rate hit a record 12.5 percent in November.

As part of Friday`s announcement, the government revised higher her estimates of jobs lost in September and October. Instead of 524,000 workers were cut in those months, 723,000 jobs were lost, or total of 1.2 million people in just three months became unemployed. Noting that 1.9 million jobs have been slashed since the start of the recession a year ago – two-thirds of them since September.

Steve Gross, a global practice leader at consulting firm Mercer LLC, says some executives are eliminating jobs “as a preventive measure” in anticipation of a long recession. “If you knew you were going to need the workers in 6 months, you would never lay them off,” he says. “But they probably do not need these workers for 12 months or longer…. Companies want to make sure that they can keep their margins.” Steve added.

(Sources: Wall Street Journal, Job Losses Accelerate in U.S. by Amol Sharma, Sudeep Reddy and Cari Tuna. And The New York Times, U.S. Loses 533,000 Jobs in Biggest Drop Since 1974 by Louis Uchitelle, Edmund L. Andrews and Stephen Labaton, December 5, 2008.)