Worried workers must think the U.S. economy has already had too many layoffs, but there are more on the way, many of them coming up in these five waves:
- Now: corporate cost-cutting. The third quarter earnings reports that stood out were the large companies that returned to profitability in the quarter as a result of the layoffs they announced last year. Many have completed their planned layoffs and are preparing to announce more. Other companies that were reluctant to undertake layoffs now see them as their best chance of returning to profitability next year. Adobe, Electronic Arts, AOL, Sprint Nextel, Sun,
- December/January: local government budget cuts. Squeezed by declines in both property values and wages, their two traditional tax bases, local governments have little choice but to cut services and lay off staffers. The biggest wave of layoffs will come with the new budgets in January and will surely push national unemployment over 11 percent.
- January/February: retail closings. Some of the retailers that barely made it through last year’s Christmas shopping season closed their doors in the weeks that followed. That will happen again, and next year’s closings could be just as big as this year’s.
- June/July: state government and school budget cuts. It will be a similar story with government units that start their budget years in July, especially states. Many states are seeing revenue fall well below the deep cuts they budgeted in June, and they will have to make more cuts next June, if not sooner.
- One year from now: economic recovery phase-out. The federal economic recovery spending winds down after September 2010, and employers that depend on that funding, in areas such as construction and alternative energy, will have to start cutting back when next summer ends.
That’s five more waves of layoffs, totaling millions of job cuts, that we can plan on. These are hitting at a time when hiring is the lowest it has ever been, in proportion to the size of the labor market (yes, it’s worse than the Great Depression in that respect), so unemployment will go up. After these waves of layoffs, there will be more job cuts to follow, as the economy readjusts, but there is reason to hope that those will be more spread out, not forming the discrete waves that we will be seeing in the coming year.