In the first eight months of the year we saw 605,000 jobs cut nationwide, and we could be looking at another 105,000 from September alone, according to a Bloomberg survey of economists. And the rest of the year could be even worse. With the sales of Washington Mutual and Wachovia, the bankruptcy of Lehman Brothers, the merger of Merril Lynch and more, we can expect many more job cuts stemming from the financial industry. In addition, the big American car manufactures are feeling the pinch and are laying off workers. Chrysler, for one, has plans to layoff 1,000 salaried workers, according to Bloomberg. And that is just the start, because small businesses across the country are hurting as consumers cut back on spending. Many of these businesses will likely end up trimming their payrolls in order to stay afloat, or just go under.
The bailout that was passed yesterday in the Senate is now heading to the House for approval. If that goes through, businesses are likely to see some help, as it will go a long way towards calming consumer fears and also help curb the potential short-term damage to the financial system. Stabilizing the job market is actually one of the biggest reasons that many people are supporting the bailout plan. If it doesn’t go through, we can expect to see some serious repercussions as consumers and business owners alike panic. This, of course, will lead to a self-fulfilling prophecy of sorts. If business owners panic and lay off workers, there will be fewer people able to buy products, which will lead to more layoffs and continue the cycle.
While it might sound like I’m in support of the bill, I’m not going that far; I see way too many problems with the bailout plan as it sits right now to even begin to support it. I don’t like the idea of bailouts in general, but in my book, this proposal is crazy. I don’t think it is going to have the desired affect and it will definitely not be worth the $800 billion investment. I do think something needs to be done, but I think we need to focus more on how to make sure this doesn’t happen again, and do our best to limit the damage without mortgaging our children’s futures.
I read a great piece this morning by Shah Gilani over at Money Morning which does an excellent job of pointing out the various pitfalls in the current proposal and suggests a plan of attack for what an effective bailout plan would cover. I suggest you read it, if you haven’t already.
Back to the job report: Things are looking grim, there is no doubt about that. Bailout or no bailout, I don’t foresee things looking all that rosy anytime soon (although without a bailout, things are definitely going to be worse in the near term). If you haven’t been making proper preparations (i.e., saving more) for the chance that you might lose your job, you might want to start now. Granted, most people are going to be okay, but you just never know. Almost everyone is hurting right now and even if you think your company is doing great, it might not be doing as well as you think. This is especially true if your company relies on the business of a few big customers. If anything happens to one of those companies, where does that leave your company? Nothing is certain right now, and it's better to be safe than sorry: Plan for the worst and hope that you are pleasantly surprised.