Could Layoffs Signal a Recession?

Predictions of an upcoming recession are seen daily in global news sources and online. But how can we know for sure what’s going to happen?

Last time we looked at bond yields and stock prices as possible indicators of a coming crisis. Today we’ll look at layoffs as a possible signal of recession.


One of the reasons that the US Federal Reserve raised its rate for overnight borrowing by investment banks and financial traders this year was that employment had improved in late 2015.

However, articles about the employment numbers pointed out that quantity does not always equal quality.

Many new jobs were part-time and/or paid lower wages. Concerns were also raised about the number of American adults who’d simply given up looking for work and weren’t counted.

In addition, the December holidays are always a time of hiring in order to meet the Christmas rush. This year US Christmas sales rose an estimated 76 percent higher than in 2014.

Globally, most Christmas sales performed “steadily” [upwards] according to a Hong Kong trade group report. Shoppers’ emphasis was on “value for money”. Last December shoppers made use of pre-Christmas Black Friday weekend sales and the Internet to shop for the best price for gifts.

Global layoffs

But almost immediately after New Year’s 2016, large employers started laying off people around the world. January’s planned job cuts rose 200% above the December 2015 rate for job cuts.

In particular retailers, announced plans to cut 22,246 jobs, the biggest cuts since January 2009.

Walmart led the pack, announcing closure of 269 stores worldwide. Energy sector firms planned to cut 20,246 jobs after only cutting a fraction of that amount in December.

Department stores were particularly hard hit by lower sales during the holidays. In the first week of January, Macy’s department store cut 4,350 jobs, citing “historically warm weather” and “poor holiday sales”.

The strengthening of the US exchange rate for the dollar against other global currencies also had a major impact on clothing stores like Macy’s and on other kinds of retail stores around the world.

Excuses given for global layoffs

Macy’s said it hoped to save $400,000 million dollars to offset its over-5-percent losses in December. Macy’s expects to lose $200 million in its first-quarter of profits for 2016.

However, on January 30th, just three weeks after its announcements of layoffs, ‘poor’ Macy’s sponsored the most extravagant fireworks display that the San Francisco Bay has ever seen after the re-lighting of the new Bay Bridge in anticipation of Superbowl 2016.

Macy’s clearly understood that marketing, not employment, was key to its survival in 2016.

Likewise, on February, 3 2016 the Financial Times announced that “Ford plans to cut hundreds of jobs in Europe as it seeks to sustain momentum in the fiercely competitive market and build on its first annual profit in the region for five years.”

Ford said it hoped to save “more than 7 percent a year by finding more efficient ways of working.” Ford will also phase out production of its lower-selling models this year.

In other words, the company made a profit, but it isn’t expecting much of a boost from market demand for its vehicles in 2016. Most likely as Ford cuts some of its products and lays off employees in Europe, Ford, like Macy’s, will focus more on advertising.

Staples, the office supply store, has taken a different tack towards surviving this year. In an attempt to compete with Internet giant’s Amazon in early 2015 Staples began again seeking a merger with Office Depot. The merger was investigated by the US Federal Trade Commission (FTC) and the Justice Department.

In late January 2016 Staples laid off hundreds of employees while continuing to work towards its long-term goal of closing 225 locations. At this time Staples is fighting a second lawsuit brought by the FTC against its merger with Office Depot.

Concentration of capital

Capital is the money that large corporations spend to stay in business. Evaluating national employment figures involves checking on how multinational corporations spend their money because the 21st century consumer market is now a global market.

When multinational retail-goods companies spend capital on big-scale advertising and mergers while cutting jobs, it’s a clear signal that “value-for-money” shoppers do not have the money needed to generate increased demand for retail company’s products.

The fruits of global income inequality appear to be coming home to roost in the US and abroad. This certainly could indicate a coming recession in places around the world.

For me the clincher will be not just the loss of employee jobs, but the gradual attrition of small shops owned by the self-employed. Self-employment is the last bastion against rising unemployment numbers in the corporate sector.

When consumers, i.e. workers, start abandoning retail stores of smaller as well as bigger sizes, you’ll know for sure we are in a recession again. Keep your eye on Main Street stores!



There are no comments yet...Kick things off by filling out the form below.

Leave a Comment