Behind big job losses, a tighter credit squeeze
Layoffs are at their highest rate since 2003. A leaner holiday season is more likely.
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Anderson believes the Fed is likely to cut interest rates by half a percentage point this month. He also expects a quarter of a point drop in December. "It's time to use all your guns," he says.Skip to next paragraph
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The drop in consumer spending is showing up in the jobs numbers for people in furniture stores, electronics retail, and department stores. Even restaurants are reducing their staffs. Losses in the retail sector amounted to 40,000 jobs, the second-largest loss next to construction.
Problems in the consumer economy point to more trouble ahead, say some labor market specialists.
Part of the consumer economy's problem is the drying up of funds. Most consumers have either spent the checks sent out by Congress this spring or used them to pay down debt. Now they are getting caught up in the credit market crisis, says Bill Hardekopf of LowCards.com, a consumer website. "Credit markets seem to be dropping for a significant number of customers, especially those with riskier credit," he says. He has noticed that the credit-card companies seem be reclassifying their customers downward. An individual considered to be an excellent credit risk may be downgraded into a good category. "So instead of getting the 8.99 percent rate that was advertised, instead they get the 10.99 percent rate," he says.
But it's not totally bleak, says Roy Krause, president of Spherion, a staffing and recruiting firm based in Fort Lauderdale, Fla. For the past 18 months, temporary hiring has been dropping each month. In September, he notes, it was down 9 percent compared with September of last year. The 9 percent drop was the same as August. "The good news is that it was not getting any worse," he says.
Part of the problem in the job market is the economic uncertainty. Now that Congress has passed the $700 billion bank-rescue plan, he hopes it will remove some of that uncertainty. Late Saturday, a state judge in New York at Citigroup's behest issued a temporary restraining order to prevent Wells Fargo from buying Wachovia. But the battle over Wachovia may be positive for the financial markets, he says. "It shows business at the right price will look at [mergers] and expansion," says Mr. Krause.