Well here we're now seeing more of the large scale layoffs in the "service economy" courtesy of Macy's (M). We had already seen it in retail in Ann Taylor (ANN) and Home Depot (HD) but on smaller scale. This is what economic contraction is all about... I am sure the unemployment rate will somehow fall to 4.7% of you listen to government reports but the reality is the reality. We have too many stores - our retail culture was built on overspending credit induced over indulgence. The Fed is trying to push us back into that bad habit with their easy money. But it's going to be tough with home prices falling and people feeling unease about their jobs... along with inflation that the government denies exists affecting their real day to day purchases.
Remember the evil in a service economy where you produce very little of value outside the country is each 100 people gone from Macy's white collar means less money to go to the entire service web - dog groomer, nail technician, grocer, hair stylist, lawn cutter, snow shoveler, etc etc. It's the vicious opposite of a virtuous cycle you have when the service economy expands.
I wrote that comment about "4.7% unemployment" tongue in cheek because 'the brighest minds on Wall Street' and their pundits told us "the government data is not showing there is a recession so stop listening to the gloom and doom types". So many herd behavior types on Wall Street only look at backwards data and don't create an actual forecast by looking forward. You know- actually thinking for yourself and looking around - but when you live in the Ivory Towers of NYC I guess it's a different universe... hard to figure out how the "average Joe" is living when you are worried about which $2 million apartment you will bid on after work. Oh well - they are learning now.
Now the Macy's pain is reaching into the stores as we offer another 7000 people the chance to be part of the new Obamaconomy.
- Macy's Inc. announced Monday that it will cut 7,000 jobs, or 4 percent of its work force, and slash its dividend as the department store chain looks to lower expenses and preserve cash amid a severe pullback in consumer spending.
- Macy's had already announced last month that it would close 11 stores, affecting 960 employees, after retailers suffered through the worst holiday season in decades.
- Macy's said it expects the latest job cuts and other actions to lower its selling, general and administrative expenses by about $400 million annually starting in 2010.
I don't know what dream world this stock market lives in, but it appears to be one where armies of people without jobs are ok as long as it's not "as bad as consensus". We are headed for 15% true unemployment and 20% unemployed/underemployed. My prediction last year that even the lousy understated government reports will show 10% unemployment rate is looking more and more likely by the day. It's going to be the worse economy since the 1930s, but "buy stocks because the charts are holding up @ S&P 800". Who the heck is going to be buying stuff or demanding credit from our lousy banks when so many are jobless. This is truly sad; I have never seen so many large scale job losses from big companies in such a concentrated manner and the market lemmings remain in denial - still! It will be fine in the "2nd half of 2009" as the Fed/Obama save us.
Consumer discretionary is to be shorted on all rebounds - I have been saying this for 1.5 years [Apr 14, 2008: Stuff I've Been Negative on Since Fall 2007] and I will keep saying it. There is no "rebound" imminent and when it "comes" (not anytime soon) it will be flaccid. [Dec 15, 2008: The "Recovery"] The same Pollyannas who got this all wrong are still giving out the same bad advice - and people still listen to them. Pathetic. The absence of critical thought even among our highest paid Wall Street minds is quite sad. If a McDonald's worker had the same sort of job performance as the punditry / Wall Street forecasters - they'd have been fired and not be given the green light to spout Kool aid every 10 days on CNBC.