The recession is supposed to be over, or at least the part during which joblessness grew. HSBC (NYSE: HBC) offered another example that is not the case. It will cut 30,000 people over the next three years. That announcement is on top of other layoff announcements from big banks and global companies like Cisco (NASDAQ: CSCO) and a number of states and municipalities.
The HSBC plan is another prick in the inflated hopes that large firms had fired as many people as they could over the course of the 2008 to 2010 period. Corporations had become so lean that they could not pile more work on fewer people. Productivity figures improved throughout almost all of the last four years. And, executives cannot get blood from a stone.
The ongoing rise in layoffs must mean one of two things. The first is that managements have discovered that they did not cut enough over the period of the downturn. It may have been hard for many to realize that extremely large cuts would not hurt sales. Sales did move higher for many of these firms as the economy stabilized late last year and early in 2011.
Other companies did not have sales recoveries. Whatever improvements the economy made, it did not reach into their industries enough to signal a rebound. These corporations have resorted or will resort to additional “downsizing” as a way to salvage margins.
Whatever the reasons might be, it has become more likely that job creation, as modest as it was, has ended in much of the US, UK, and EU. The situation may get even worse as austerity measures cause more job loss in the public sector. A downturn in government expenditures will mean a withdrawing of whatever stimulus was in place, along the impact of aide
The HSBC layoffs are just the tip of an iceberg which has grown each of the last few months. That will continue if normal cause and effect take place in the job market. And, that tilts the economy in the direction of a new recession as the second half of the year wears on.
Douglas A. McIntyre
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