"Layoffs Mount As Recession Gets Worse"

MICHELE NORRIS, host:

This is All Things Considered from NPR News. I'm Michele Norris.

ROBERT SIEGEL, host:

And I'm Robert Siegel. Read today's job cut announcements and you'd be tempted to call this "Black Monday." But nowadays, there seem to be any number of Mondays vying for that honor. Here's today's claim to bleakness - 20,000 jobs cut at Caterpillar, 8,000 jobs cut by Sprint Nextel, 7,000 at Home Depot, 8,000 job cuts expected from the merger of Pfizer and Wyeth, and 2,000 jobs at GM plants in Michigan and Ohio. That's 45,000 jobs in this country. And in Europe, there's also bad news: 7,000 jobs cut at the financial services company ING and 6,000 at the electronics company Philips. Well, joining us is Barry Ritholtz who founded the financial blog "The Big Picture." He's also a CEO at Fusion IQ, an online quantitative research firm. Mr. Ritholtz joins us from the NPR New York bureau. Welcome to the program. Forty-five thousand U.S. jobs cut in a day. What does that say to you?

Mr. BARRY RITHOLTZ (CEO and Director, Fusion IQ; Financial Blogger): Well, it tells us that we're going to continue to see some layoffs for some time to come. It's not just the job losses today. You look at the entire month of January and we're up to 150,000. And that means that we're in a very serious downturn in the job market that's likely to continue for the foreseeable future.

SIEGEL: And do those numbers tend to conform to expectations of policymakers or do they suggest a more dire and deep recession than they might have thought?

Mr. RITHOLTZ: I always take policymakers' expectations with a grain of salt. If you recall in - for most of 2008, most of the policymakers at the Federal Reserve and the Treasury Department were telling us that the housing issues were contained, the credit problems were contained, and that we'll, you know, hopefully avoid a recession. Their expectations tend to be very, very optimistic - overly optimistic. And that's the way it usually is.

SIEGEL: When you add to the announcement today by a company like Caterpillar and Home Depot, for that matter, last week's announcements of layoffs by Microsoft and Harley Davidson, we were talking about brands that connote quality in this country.

Mr. RITHOLTZ: Well, but these are brands that are not insulated from the broader economic cycle. If we're looking at Caterpillar, we're looking at a company that makes the bulk of its money through development of commercial and residential real estate. Obviously, both of those areas are doing very, very poorly. If you're talking about Microsoft and Intel or any of the other tech companies, we've seen some very, very bad earnings and a general warning from most of the people, most of the companies in this sector that things aren't going well. When was the last time Microsoft and Intel both announced layoffs of 5,000 people? We know PC demand is weak, mobile phone sales are poor, and discretionary consumer spending is weak. That means technology is going to suffer just like the rest of the economy.

SIEGEL: Well, what do you make of the layoffs announced in Europe by Philips, which doesn't make expensive discretionary things?

Mr. RITHOLTZ: You know, it's pretty clear that everybody is sitting down and looking at their bottom lines and their total revenue numbers and saying, gee, you know, we are going to be running at a negative rate of return. We have to get our costs down. You can't maintain the same workforce if you're putting out a hundred widgets when you're only putting out 50 widgets. So, they start cutting back where they can. And unfortunately, a lot of the cuts fall on the labor force. That's - you know, when you look at a box of cornflakes, the most expensive ingredient isn't corn or sugar, it's the labor that goes into it. And that's why it's the first place where companies look to start saving a little cash flow.

SIEGEL: Is there anything about job cut announcements that can tell us whether we are heading for the bottom of a recession, whether we're already at the bottom of the recession, or whether there is much, much worse to come?

Mr. RITHOLTZ: You know, the interesting thing about labor data is - and employment data is that it tends to very much lag the economic cycle. If you look at the past five recessions, layoffs and headcount reductions took place six to nine months into the recovery. So the strange thing about these big layoff numbers is that they very often occur even after the economy has bottomed and has began to move higher. So, unfortunately, you can't draw any specific conclusion that things are getting better, the economy is picking up, when based on the pace of layoffs. In fact, things will be getting better, and we'll still be seeing significant layoffs. At least that's what history has shown us.

SIEGEL: Mr. Ritholtz, thanks a lot for talking with us.

Mr. RITHOLTZ: Thanks for having me.

SIEGEL: It's Barry Ritholtz, who is the founder of the financial blog "The Big Picture."