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Unemployment Pink Slips Mount and So Do Concerns

Economics / Recession 2008 - 2010 Jan 07, 2009 - 03:29 PM GMT

By: Mike_Shedlock

Economics Best Financial Markets Analysis ArticleIncreasing numbers of "Pink Slips" are weighing on the minds of consumers. Every industry, every service is affected, not just in the US, but globally. Please consider Alcoa to cut 13 pct of global work force
Alcoa Inc., the world's third-largest aluminum maker, said Tuesday it will cut 13,500 jobs, or 13 percent of its work force, and slash spending and output to cope with the global economic slowdown.


The reductions expand on cost-cutting measures announced in October, when Alcoa reported a 52-percent decline in third quarter profit, due to sharply lower aluminum prices, weaker demand and a charge from curtailing a smelter in Texas.

Production of alumina, a material used to make aluminum, will be reduced to 1.5 million metric tons per year in response to market conditions, the company said. The production cuts are expected to be completed by the end of March.

Broader production cuts are needed by Alcoa competitors, such as Rio Tinto Group and aluminum producers in China, Bradford said, and prices are unlikely to stabilize unless more drastic steps are taken.

"The problem is a lack of demand," he said. "With the lower price, Alcoa has got to try to bring its costs down. There is no way they can make money at 65-cent aluminum."

Alcoa said it will seek to lower costs for energy and raw materials, such as coke, caustic soda and aluminum fluoride.

Pink Slips Mount In China

China's uninterrupted growth for nearly three decades is coming to an end. Evidence can be found in China's mounting pink slips

After 30 years of nearly continuous, even momentous, economic growth - which has lifted millions out of poverty and bolstered the ruling Chinese Communist Party - the economy's manufacturing base is slipping. Last month, exports dipped for the first time in seven years.

Mounting factory layoffs this year - around 2 million have been sent packing near the factory city of Dongguan alone - have prompted a string of noisy but isolated protests across the country's southern industrial region.

Fretful Chinese workers have yet to channel discontent into unified campaigns, or demands for representation in the political sphere. But whether Beijing can so easily mollify the growing apprehension among the country's middle class could be another story entirely.

Cutbacks In Health Care

Health care was one of the bright spots over the past couple of years as everything else started to falter. Inquiring minds are now noting that Health insurer Cigna Cutting About 1,100 Jobs

In actions described as a response to the economic downturn, health insurer Cigna Corp. said late Monday it would be laying off 1,100 employees, roughly 4 percent of its work force, as well as consolidating unspecified real estate locations.

“Given the unprecedented economic situation we and our customers are facing, these actions are essential to ensure we can meet their needs for high value, cost effective products and services,” Cigna Chairman and Chief Executive Officer H. Edward Hanway said in a statement. “Decisions like these are difficult and never made lightly, but they are necessary given the current environment.”

Obama To Create Government Jobs

Change.Gov, the office of president-elect, is highlighting Obama's plan to create jobs called the "American Recovery and Reinvestment Plan"

“We need an American Recovery and Reinvestment Plan that not only creates jobs in the short-term but spurs economic growth and competitiveness in the long-term,” he says. “And this plan must be designed in a new way—we can't just fall into the old Washington habit of throwing money at the problem. We must make strategic investments that will serve as a down payment on our long-term economic future. We must demand vigorous oversight and strict accountability for achieving results. And we must restore fiscal responsibility and make the tough choices so that as the economy recovers, the deficit starts to come down. That is how we will achieve the number one goal of my plan—which is to create three million new jobs, more than eighty percent of them in the private sector.”

To build a 21st century economy, we must engage contractors across the nation to create jobs rebuilding our crumbling roads, bridges, and schools. To save not only jobs, but money and lives, we will update and computerize our health care system to cut red tape, prevent medical mistakes, and help reduce health care costs by billions of dollars each year. To make America, and our children, a success in this new global economy, we will build 21st century classrooms, labs, and libraries. And to put more money into the pockets of hardworking families, we will provide direct tax relief to 95 percent of American workers.


Obama said "more than eighty percent of them in the private sector". Assuming it is exactly 80%, that would mean there will be 600,000 new government employees, the last thing the US needs.

Filling potholes and repairing bridges will not create any lasting jobs. Nor will building libraries or enhancing classrooms. The best library is the internet and save the cost of an internet connection and computer, the information is free. Compare to the cost of maintaining a brick and mortar library.

More importantly, for the work that needs to be done, inquiring minds are asking "what will cost?"

The answer is the highest possible price on account of the Davis-Bacon Act , a remnant of the Great Depression that prolonged the depression then and is still backfiring today. Davis-Bacon created a nightmarish "prevailing wage" concept that insured government would pay the highest possible wage for services rendered. I recommend Congress abolish Davis-Bacon but the odds Obama supports the scrapping of Davis-Bacon are pretty slim.

Bear in mind that government cannot really "create" any jobs per se. It can raise taxes and shift private sector jobs creation to government jobs creation (typically a malinvestment), and it can bring production and consumption forward for those jobs that are genuinely needed (filling potholes), but once the potholes are filled, one has to ask the question, "What will we do for an encore?"

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

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