Mark RaskinoAre we half way through yet? That’s a question about the recession fewer commentators seem to be asking. Perhaps that itself is a good sign (bull capitulation). Those looking for the half way marker and the turning point will often remind us that government unemployment figures, while interesting, are a lagging indicator. So instead they will turn to the job loss announcements – which should give us heads up on where unemployment is going next.
Over the last month, the news columns and front pages have been awash with stories of major layoffs in the tech sector (example here) which would seem to indicate increasing levels of IT unemployment and underemployment ahead. But it is important to get behind the facade a little. Here’s the pattern I see:
- Many CEOs needed to maintain confidence as long as possible through their quarterly updates last year (nobody wanted to be first to declare a problem for fear of sudden and severe investor reaction).
- Most CEOs, at declaration of their 2008 results now feel that the whole world is in agreement about the recession, so the downside of revealing the full story of what they are seeing has been substantially discounted already. (note the US government published stats on IT investment decline I posted here)
- The job now is to get the pain out of the way quickly and to show, that as strong leaders, they are dealing with the problem.
- So the PR imperative is now reversed: instead of waving away the problem, they must now amplify just how much they are doing to get their business fit for the new realities.
With all this in play, its important to notice something about the lay-off numbers you are reading. They are often round numbers and they tend to be rounded up, to double digits if applicable, for large companies. So it’s not 4,100 but 5000; It’s not 8750 but 10,000. Overall the effect is to inflate and exaggerate our perception of the total numbers for the industry.
How many journalists will be going back to these businesses in 18 months and asking whether they in fact removed the specific stated numbers from payroll? Probably very few. They won’t waste time asking becuase we won’t find it a very interesting thing to read about. Severance programs can take that long to deliver – during which time other cost savings can often be found, the economy might pick up, or management may find that cutting too deeply is proving counterproductive. So the number of people who actually lose their jobs could end up quite a bit lower than the number first ‘advertised’.
None of this says we are in for an easy time. It will still be a wretched experience for the many people who are impacted. It is also true that the secondary employment impacts on smaller businesses and suppliers – of large company cutbacks don’t feature prominently in the news flow.
P.S. All heuristics are imperfect. So for a counterpoint – this WSJ story seems to suggest at least one major vendor is behaving differently.
Category: CEO Economy Management Recession Strategy Tags: Add new tag, CEO, Jobs, Recession, Unemployment
1 response so far ↓
1 Vishlysr June 21, 2009 at 1:48 pm
We’ve crossed mid 2009 and it is a welcome relief to know that the overall productivity is increasing. Usually productivity falls in a recession. So there are overall some good signs. But what about the ones who have lost their jobs? Thankfully, there are some websites where people who have been affected by job loss in the current recession could share their anxieties and problems with others having faced similar problems in the past. One website that is interesting is http://www.angstcorner.com.