Here Come the Job Cuts
Thursday, September 6th, 2007
By Michael Lombardi, MBA for Profit Confidential
Two years ago, I started writing about how a slowdown in the housing market would start and spread to other parts of the U.S. economy. Most of what we’ve been told by Wall Street and the Fed itself was that the housing slump would not affect other parts of the economy.
What we’re being told has been proven wrong and wrong again, as the housing rut first affected the subprime market, then affected the ease with which homebuyers could get mortgages, then home improvement companies and then, I believe, car sales. But get ready: The job cuts outside the housing industry are starting up.
Yesterday, Chicago-based Challenger, Gray & Christmas, Inc. issued a report stating that planned U.S. job cuts jumped 85% in August from July. The cuts were not in the construction area as most would assume, but in the financial services industry. Eighty- five percent of the job cuts in August were in the subprime and mortgage lending businesses.
An 85% jump in job cuts is huge. We haven’t seen this time of job trimming since the days and months after 9/11. I expect to see more jobs cuts in construction, lending and the auto industry in the months ahead.
Next, I’m predicting U.S. consumers will put the brakes on general spending and that is what will put us in the recession I am predicting the U.S. economy will experience by the end of 2007, early 2008. Yes, the Fed could and likely will come to the rescue and bring down interest rates, but this might not help consumers this time around.
What is the use of decreased interest rates if consumers can’t qualify for home loans because the subprime market has been shut down? Will decreased interest rates spur consumers to buy houses in an environment where housing prices are declining? I believe not. Remember when Japanese interest rates went close to zero several years ago and consumer spending not going up? In fact, deflation happened there with the lower rates. The same chapter in the story could be repeated here.
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Tags: housing market, interest rates, U.S. economy
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
