Economy: if it's so good, why all the layoffs? : LUSENET : TimeBomb 2000 (Y2000) : One Thread

If everything is so rosy, why do companies keep laying off more people? I keep reading that the American economy has never been better. Stocks are 10,500 and higher and the tv experts are saying Dow 12,000 by September. Unemployment is at an all-time low. Even Maine supposedly has one of the largest job-creation rates in the country.

But I just finished reading my local papers here in Maine (found out about this forum from a local chat room) and it's one story after another of layoffs -- this paper mill losing 300 jobs, that lumber mill closing and taking 110 jobs with it, an electronics plant laying off 35 people and the big computer chip plant in South Portland on the market. A woolen mill that closed for Christmas and never reopened. Are these new unemployed getting service-sector jobs that pay peanuts or part-timing it to keep the bills paid? If everything is so good, why is everything so bad? And this is *before* y2k hits. Am I missing something here?

-- Searcher (, May 07, 1999

Answers are not missing something. But the serivce industry is absorbing these workers. However, when you made $10/ hour at the mill and now are making minimun wage at Burger King there is a vast diffference in your disposable income. However, the statistics only show that you are not unemployed. Further more they gather those figures from State Unemployment offices. You use up your alloted time of benefits and still don't have a job, you are removed from the unemployed list. Simply because you are no longer reporting and collecting benefits. It is ASSUMED that you got a job when the benefits ran out.


-- Taz (Tassie, May 07, 1999.

Plus, if you have two or so part time jobs, you are not counted, but may in truth be WAY under employed.


-- chuck, a Night Driver (, May 07, 1999.

They're just letting those workers rest up until the rollover, when they'll hire them all back when they go "manual".

-- eminem (slim@shady.who?), May 07, 1999.

It is "the market" (Stock, P/E ratio) that is good. Business has lots of cheap labor to draw on. Business has a vested interest ($$$) in being anti-nationalist (globalist) so they can get, literally, the world's cheapest labor.

Like the government, people in the West are living on a mountain of debt. For now, though, the 3rd-world loves it. As Western nations decline (ignoring you BMW drivers out there), the 3rd-world improves. Redistribution of wealth at its finest.

-- Anonymous99 (, May 07, 1999.

Also, look at the industries that you identified as closing or downsizing. They are in sectors that have been trending downward for the last 30 years (with the exception of the chip maker... the integrated circuit industry has been in a slump for the past three to four).

Also, don't disparage the "service sector" too much. Although I don't expect that unskilled or semiskilled factory labor will benefit from this, the service sector includes software development, finance and other high margin areas (both for employees and for businesses).

While it's a shame that those people will lose their jobs, the real issue is whether they are trainable into other fields. If not, the $10.00 per hour they were getting was probably not sustainable anyway.

-- J.D. (, May 07, 1999.

Internal restructuring is one reason. Companies need more IT professionals and fewer not support staff. Corporate re-engineering is now happens continuously. Reason two: (and more cynical), stock values increase when layoffs are announced. Many executive compensation packages include stock options. Reason three: inflated stock prices have fueled merger activities. When you merger, you can consolidate some staff functions, ergo layoffs. Reason four: not all companies are making money.


-- Mr. Decker (, May 07, 1999.

...especially the layoffs in the military the last 7 years!

-- (, May 07, 1999.

Alan Greenspan puzzled over this in a speech he made a few days ago. Unemployment used to be considered 'minimal' at 6%, the idea being that at least 6% of the workforce would be between jobs or unqualified for available positions at any given time. And any unemployment rate below this was supposed to guarantee inflation, with employers bidding up the prices of 'scarce' labor. Yet now we have 4.2% unemployment with no inflation.

On top of that, real GDP is growing far faster than expected, and the market climbs higher and higher. Greenspan's hypothesis is that this can only be explained by increased productivity, likely the result of all of our computerization. And if people are widely underemployed, this increased productivity would not be possible. Nor can service sector employment be considered less productive.

Finally, there is a perception issue. If one company lays off 1000 people and 1000 companies each hire one, guess which event gets the publicity?

Y2K cannot possibly be good for economic efficiency. Fixing breakdowns and recovering from crashes is economically unproductive. A trillion dollars in lawsuits is unproductive. Time wasted straightening out errors (and we'll all be part of this exercise) is unproductive. The magic carpet may not crash, but it will almost surely lose a genie or two.

-- Flint (, May 07, 1999.

Last fall I saw a commentary on "Nightly Business Report" on PBS that touched on this topic. It seems that not everyone is benefiting from the great economy. While those earning more than $75,000 have done well in the 1990s (presumably due to investments, corporate salaries or whatever) and those earning less than $15,000 have made some gains (primarily due to the increase inn the minimum wage, not that that earning MW is that great), workers earning in the $15,000 to $45,000 range have not done so well. I know that I dont have the buying power that I had 10 years ago. The monthly bank statement tells me that.

Overall, the US economy does look strong. The statistics cant be cooked that much. Maybe this is just a case of the needs of the many outweighing the needs of the few (sigh).

-- name withheld (not@to_post.my_salary_range), May 07, 1999.

I don't know what the answer to your question is, but I believe that it will be revealed by the number of votes Pat Buchanan receives next year.

I expect Buchanan's support to be made up entirely of people who have not enjoyed the wealth that supposedly all Americans are experiencing these days.

-- GA Russell (, May 08, 1999.

The job losses in Maine are similar to our own in Northern California. (BTW, we have had double digit unemployment and welfare since the spotted owl listing.) It is obvious to me that we have become an "imperial" state feeding off the resources of the third world. We may be protecting our own environment, but we have placed enormous unsustainable pressure on the environment of developing nations.

US environmental regulations have become so suffocating that we cannot compete in a world market. We can no longer mine, log, mill, graze or farm. Soon the skills and the infrastructure to do these things domestically will fade away. Gradually wealth will be redistributed. The standard of living will improve in the third world and ours will decline as the effects of economic equalization set in.

The creation of "real" wealth comes only from development of natural resources. Upon this foundation, money is circulated many-fold through the community by adding value through labor. A "service" economy is mere foam on the hearty broth that sustains an economy.

We are nothing without oil, metal, wood, food and fiber resources. Without these, there is nothing to add value to. A "service" economy is hollow.

If we learn nothing else from y2k, it should be very apparent that we have placed ourselves in a precarious position by overdependence on the so-called "world economy." Take a good hard look at where your raw natural resources originate. The percentage of domestic source diminishes every year. I don't see how we can pretend we will be isolated from the worldwide effects of y2k.

IMHO, the robbers have been amongst us for decades, stealing our capacity for self-determination and the standard of living for our children.

-- marsh (, May 08, 1999.

So, Marsh, you oppose free trade.

Perhaps you would suggest tariffs (i.e., more taxes)?

-- Jeff Donohue (, May 08, 1999.

"Free trade" is not so free. I know our farmers can't compete with our neighbors when they have subsidized rail transportation, have to deal with domestic environmental regulation specifically designed to kill an industry (e.g. Cattle Free by '93,) and protectionists bans against foreign imports founded on trumped up junk science. It is not a level playing field. Add to this a dynamics of a monopoly of processors (there are basically only three meat processors in the US,) which preclude passing on added expense of inputs and forced set-asides of privately owned resources, and small industry is slowly strangled to death.

I know that the average age of ranchers in the US is around 60. What happens when they retire or die? The scientists name "poor age class recruitment" as a reaon for listing species as "endangered," (e.g. Lost River sucker.) What about our resource industry classes? Do you know how to fall an 80-100 foot tree so it lands within a foot of where you want it?

I remember testimony in the NAFTA hearings by a British gentleman. He pointed out that with the disparity in wages and living standards, unrestricted trade could only result in the flow of money out of the developed countries into the third world. The standard of living is like water, it is seeking equillibrium.

Industry classes, labor, etc. have always used the walls of the "national box" to pressure for better prices, wages and benefits. With "free trade" they have lost their leveraging power. When companies run into difficulties with domestic labor and environmental restrictions, they move to Mexico or Thailand. The clothing industry has revealed the status of some offshore workers that produce our cheap imports. In some countries there is child labor.

If this is the level of the playing field, why are we so quick to jump into it? The only way we have been able to attempt to compete is by increased productivity through technology. For the small producer, this technology may be out of his reach and, in many cases, environmental regulations now favor low-tech, low impact technology. There is also a plateau of technology acceptable to many - bio-genetics in agriculture is one. Events during the past few decades illustrate how difficult it can be to re-tool an aging manufacturing infrastructure to modern standards. Seems like economic and social suicide to me.

-- marsh (, May 08, 1999.

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