Huge Layoffs and What They Mean

I got a great email from Rose King of Accountingdegree.com the other day. She shared with me a blog entry they authored about 13 Huge Layoffs. Below is an excerpt from it.

I’ve always been fascinated by layoff announcements. Not in a positive way, but in a curious way. It prompts questions about what went so wrong? I tend to group these reductions in one of two ways.
– The first is as a communication to their shareholders that they are working to reduce the imbalance built up in the cost structure. Usually, this is when the number of people is very high. A classic example is when orders have fallen off over an extended period and the company needs to face the music.
– The other is when the bottom line is going to be missed and the executives need to find a few million dollars. Usually this isn’t a high number, but rather its individuals with high compensation.

But both are an admission that the strategy isn’t panning out. The company should state what is changing in their business plan or their focus. Is the product portfolio no longer innovative? Can extraneous business units be sold off? and so on.

The sports fan in me is wondering when we’re going to hear about mass layoffs by the NFL? I guess pay cuts have already begun.

The other aspect of this blog entry that grabbed my attention is how most of these are fairly recent (within the last decade).

These days, many Americans are suffering at the hands of layoffs,
but mass job cuts are hardly a new thing. Often a result of new
efficiency or simply running low on cash, thousands of employees can be cut at a time. Here we’ll take a look at 13 massive layoffs in American history.

  1. Intel:
    In 2006, Intel announced a major restructuring that included the layoff
    of 9,500 employees, and an additional 1,000 managerial jobs. Then in
    2009, Intel closed chip plants, resulting in up to 6,000 layoffs.
  2. Microsoft:
    In its then-34th year of business without mass layoffs, Microsoft cut
    an initial 5,000 jobs, and even more by the end of 2009. The layoffs
    came in response to a major loss in profits and a need to reduce
    operating expenses and capital expenditures.
  3. Airlines:
  4. Citigroup:
    In 2008, Citigroup laid off 52,000 employees, making up for massive
    write-downs. The number of jobs cut by Citi is about the same as the
    total amount of cuts in the entire US financial services industry in
    2006. As New York City’s second largest private employer, Citi’s
    layoffs had a major impact on the city, as well as Citi stock.
  5. Merck:
  6. Dow Chemical:
  7. US Postal Service:
    The public workforce is not immune to layoffs, as evidenced by the USPS
    cut of 7,500 administrative positions. This cut impacted 2,000
    postmasters, which will likely mean closing the post offices they
    operate.
  8. HP:
    After an acquisition of Electronic Data Systems Corp, HP cut 7.5% of
    its workforces fo realize savings. That amounted to a cut of 24,600
    jobs over three years. Additionally, HP announced plans to spend $1
    billion and cut 9,000 jobs over three years to move to fully automated
    commercial data centers, with job cuts stemming from automation and
    productivity gains.
  9. Borders:
    The popular bookstore Borders announced plans to close 200 of 488
    superstores as part of a bankruptcy protection filing. These closings
    resulting in the laying off of 6,000 employees out of 19,500.
  10. IBM:
    IBM made drastic new cuts in 1993, letting go of 35,000 jobs as part of
    an $8.9 billion program to cut costs. The company also let go of some
    factories and equipment, shuttering plants. The measure was applauded
    by investors, and was praised for being a clean, drastic cut, rather
    than dragging out painful layoffs over several years. Employees were
    given incentives to leave, and there was also an early retirement
    program to encourage a positive outcome for both employees and the
    company.
  11. NASA:
  12. Automakers:
  13. Pfizer:

Split Personalities – Tax Breadth and Tax Depth

We seem to have split personalities when it comes to the news and our politics. In the news we hear about natural disasters and the sour economy. In politics we hear about the failings of the President and the deficit. Why are these two voices talking about different subjects?

The truth is they are talking about the same problem, just different ends of it. The US is maturing. A large portion of the population is entering their retirement years. Every day, for the next 19 years, 10,000 baby boomers will turn 65. By 2030, 18% of the U.S. population will be over 65, compared with today’s 13%.

This is important for several reasons, but here are two:

  1. Federal tax collection is based on income. Those that are retired usually don’t make significant income, so the taxes they contribute are very low. A change or decrease of 5% is a huge impact to the revenue of the government. Or said another way, 10,000 people, who have a high average income, can drop out of the tax pool everyday.
  2. The baby boomers have been in leadership positions for two decades. The groups behind them, smaller in numbers, will need to fill the void.

The first reason is why you hear about Medicare and the budget. The second reason is why you hear about stimulus and silicon valley.

– When we talk about the deficit and paying down the debt we are talking about the inevitability of time. Our demographics show an aging population who will not be contributing to tax rolls. Less income means less spending. Tax Breadth.

– When we talk about innovation and stimulus spending we are pushing for investment and hopefully an improvement in future wealth and the standard of living. This would offset the loss of tax income from those no longer in the workforce. Tax Depth.

Both of these are concerns. I tend to be more transfixed with the latter. Many young professionals are either not entering the workforce or they are at compensation levels below the norm of 5 years ago. This lag in pay is not easily overcome and tends to persist for a career. Smaller income means smaller taxes paid. In addition to that, younger professionals are not moving into challenging roles as they would have in the past. Opportunities for learning experiences are reduced. Plus what they’ve been taught in school isn’t applicable e.g. China has changed dramatically since 2007, but the text books didn’t.

The 18% not in the workforce is unavoidable, but what should be asked is what’s to come of the under employed?

There will always be some number of the under employed, but we are currently looking at a devastating mix of long durations and loss of skills. The recession as it began in 2007 was a supply and demand recession, meaning nothing out of the ordinary occurred. But the last two years has led to a structural recession. This means that the skills and knowledge the US worker has isn’t quite matching up with what labor is needed. If this is more than a blip then high unemployment will continue for a few years as education and training requirements sort themselves out.

But I also feel like the 16-24 group, or more broadly the under 30 age group, is pioneering a new track. The way the view the world is much different than their older counterparts. As a consumer group they can influence the creation and offering of products and services. The next 24 months will be telling about the future of this country.

April 2011 Jobs Report and Wages

Here are the job market and compensation numbers for April 2011 (based on the job report):


Net gain
of 244,000 jobs in the month

  • Analysts expected an overall gain of 185,000 (200,000 for private sector growth)
  • Private sector payrolls increased by 268,000
    • Private service producing industries added 224,000 (199,000 last month and 152,000 the month before)
    • Goods producing industries gained 44,000 (31, 000 last month and 70,000 the month before)


  • The US has added 800,000 private sector jobs this year and 2.1 million total over the past 14 months
  • The last three months have averaged a job gain of 233,000- this is the fastest rate of growth since early 2006
  • February was revised to a gain of 235,000 from a revised 194,000 and an original reading of 192,000
  • March was revised to a gain of 221,000 from an original reading of a 216,000 gain
  • Revisions added 46,000 jobs
  • There are 6,955,000 fewer total nonfarm jobs since the recession started in December 2007. Although 244,000 jobs added is good, it will take 29 more months to dig out of the hole
  • Payroll processor ADP reported an employment gain of 179,000 jobs
    • 47% of the 179,000 ADP reported gain came from small business (firms with less than 50 employees). It was 49 last month and 46% the month before
    • Large businesses (greater than 500 employees) hired 6.25% of the 179,000 gain


  • McDonald’s hired 62,000 workers, but those hirings missed the survey window and will be more associated with the May Jobs Report
  • About 13.7 million people were out of work in April – however, in a positive move many newly unemployed people are not getting fired.
    Instead they are leaving voluntarily, presumably because they think they
    can do better.
    The number of people unemployed because they lost jobs fell to 8,144,000 in April, the lowest figure in two years
  • 5.8 million had have been jobless for six months or longer (a drop of 283,000 from last month, which is good) down from 6.5 million in March 2010

    • 43.4% of the unemployed are long term unemployed. Down from 45.5% last month
  • Employers
    announced plans to cut 36,490 jobs in April, down 4.8% from April 2010 when the economy stalled

Unemployment rate rose to 9.0%

  • Analysts predicted it would remain at 8.8%
  • The labor force
    participation rate is 64.2% (66.5% is average to good) – unchanged for the fourth straight month
    • Lowest since 1984
    • The participation rate was dropping before the recession began due to changing demographics of the US population
    • Every day, for the next 19 years, 10,000 boomers will turn 65. By 2030, 18% of the U.S. population will be over 65, compared with today’s 13%
    • Job expansion to account for population growth (keeping the unemployment rate steady) is estimated to be 150,000 and 200,000, but the partially delayed retirement of the baby boomers is moving these numbers to 75,000 to 100,000

  • The employment to population ratio is 58.4% – No change
  • Normally the unemployment rate moves in lock step with changes to the participation rate and the employment ratio but the diverge this month because the household survey is finding a reduction of employed people by 190,000 people. With surveys there tends to be noise and the drop from 10% to 8.8% was probably too quick so a little rise is natural to sort things out
  • The
    U-6
    report, which is a broader group to count (workers who are
    part
    time but want to be full time and discouraged worker), rose to 15.9% from 15.7% last month
  • PMI,
    a measure of manufacturing pace, is 60.4% and the 22nd consecutive
    month of readings over 50 percent. Anything above 50% means the
    machines are running
  • Service
    sector activity dropped to 52.8% from 57.3% last month and down from 59.7% in February. A dramatic drop when compared to other improvements (lowest level since August 2010). It was the
    16th straight month of growth
  • GDP, the most widely used measurement of the the American economy grew at a lackluster 1.8 percent in the first quarter,
    according to the government’s estimate for the first quarter
  • Nonfarm business sector labor productivity increased at a 1.6 percent annual rate during the first quarter of 2011

Specific Segment Job numbers:

  • Manufacturing gained 29,000 jobs
  • Construction gained 5,000 jobs
  • Retailers gained 57,100 jobs
  • Leisure and Hospitality Services gained 46,000 jobs
  • Government sector lost 24,000, 22,000 was state and local government
  • Education and Health Services grew by 49,000 jobs
    • Health Care and Social Assistance grew by 41,800

  • Professional and Business Services grew by 51,000
    • 2,300 jobs lost in Temporary Help

Wage (can be revised):

  • The
    average weekly paycheck (seasonally
    adjusted) is $650.83
  • The average hourly earning (seasonally adjusted) is $19.37 – up a nickle from last month
  • Corporations set a new record for profits: $1.68 trillion annual rate in the fourth quarter of 2010
  • Average
    weekly hours and overtime of production and nonsupervisory employees on
    private nonfarm payrolls by industry sector, seasonally adjusted is
    33.6 hours, no change

Bureau of Labor Statistics

Using Particular Phrases to be More Compelling

I’ve recently been on vacation and I’m catching up on some reading. One of my favorite magazines and websites is the Harvard Business Review or HBR.org.

In the March 2011 issues is an Idea Watch section about the persuasiveness of experts. What the finding suggests is that when experts are less certain about their opinion, the more likely the opinion is going to be interesting and perhaps more intriguing to the audience.

What does this mean? It’s a little nugget for helping when people are scanning through information. If there are themes or patterns people tend to zone a out a bit. Important nuance can be lost. But when those themes are broken the reason for the deviation prompts curiosity.

This can be applied in the workplace. As the labor reports are coming out the economy is slowly picking up steam. There are many people looking for work. If you are writing a job recommendation for someone, its good to pepper in the phrase “high potential” in addition to “high achieving.”

  • High Achieving – Is a reference to the past. It shows capability and success but it isn’t necessarily relevant.
  • High Potential – Is a reference to the future. It latches onto a vision, onto hope, and shows adaptability and flexibility. Its more inspiring.

Here’s a blurb from the article Experts are More Persuasive When They’re Less Certain:

What makes a message compelling?

By “compelling,” I mean relevant to the core argument. In
another study, we had subjects read reviews that also gave four out of
five stars, but their content wasn’t really about the restaurant. They
said things like “My friend and I laughed the whole time. I liked the
way the menu looked and the colors they used.” That’s not compelling.
Even if it were interesting, it’s not what makes a restaurant good or
bad. Whether the reviews were confident or not, people didn’t find them
persuasive.

Where else do you want to take your certainty research?

One thing I’ve started looking into with some other
collaborators, Jayson Jia and Mike Norton, is how people view potential.
Our initial findings seem to show that people value high potential more
than high achievement.

That explains why a rookie quarterback like Sam Bradford makes more money than Super Bowl champ Drew Brees.

Sports are a great example. In one study,
participants read the scouting report on a basketball player. Some read
the actual stats for the player’s first five years in the league; others
read predictions for the first five years’ performance. The numbers
were identical. Then we asked, How much would you pay this player in
year six? On average, people gave the veteran who had performed $4.26
million and the rookie who was projected to perform $5.25 million, over
20% more.

Rookie talent in general, not just in sports, seems vastly overweighted.

Exactly. If you present people with letters of
recommendation for one job candidate described as “high potential” and
another described as “high achieving,” they’ll find the letter for the
high potential candidate more interesting and possibly more persuasive.

How can people be so thick?

Proven achievement is very certain. It’s less surprising
and less interesting to think about. Potential is uncertain and kind of
exciting. You can imagine many outcomes. Maybe they’ll do better than
you expect!

OK, I have to ask: How certain are you about the validity of your research?

I think our findings tell us something important. But you
never know what other variables could be in play here. The more we
research this, the better we’ll understand it.

I’ll buy that.

You see? It works.