Cut my jobs and I'll cut my spending. Hopefully
Written by A Forex View From Afar on Tuesday, January 15, 2008Back to www.thelfb.com
More bad news for the financial sector, with Citigroup cutting 4000 jobs, and according to Challenger Gray last year, with the industry shredding more then 153.000 jobs, from which 86.000 were mortgage related.
Leaving behind the bogus payroll release, we are seeing how the "job market" really is. Spring Nextel just announced to continue cutting 5000 jobs and almost 40.000 in the Pharmaceutical industry were cut last year
Even the Hollywood guys aren't doing so well, Warren Bros studios warned they'll have to cut 1000 jobs.
Job cuts are seen as good for companies, they reduce the fixed cost and boost profit, but job loss in macro economical terms is very bad.
Seeing colleagues remaining without a job, our Average Joe will reduce spending on his own, thinking the same thing may happen to him, and since major industry are loosing jobs it's more likely that consumer will reduce spending in the coming month. Remember, US is all about spending? 70% of the Gross Domestic Product lays in the consumer's ability to spend.
The GDP will probably take another hit this year from the market turmoil, with the financial industry adding up to 20% of it, and most banks taking big loses on their accounts.
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Sources:
Forbes: Report: Sprint Nextel to Cut More Jobs
39,870
Warner Bros. Warns Up To 1,000 Job Cuts Due To Writers' Strike
Bloomberg: Citigroup Posts Record Loss on $18 Billion Writedown
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