Layoffs continued with 1,623 mass layoffs and 265,147 individuals being retrenched during the second quarter of 2011, according to a Bureau of Labor Statistics Aug. 10 press release.
The unemployment rate of 9.1 percent, with 13.9 million people out of a job, hasn’t changed over the past months. Although hiring in some sectors, such as health care, manufacturing, mining, and retail trade had trended up, local governments began to retrench, with the state of Minnesota laying off more than 20,000 people.
Also, with jobs moving to foreign shores in the coming years, Americans need to tighten their belts. Corporate America is no longer moving just manufacturing jobs to foreign shores, but also white-collar jobs.
Hackett Group December 2010 research suggests that corporate America will outsource another 1.3 million white-collar workers by 2014.
June media reports suggest that Goldman Sachs Group Inc., despite record profits and having taken a $10 billion taxpayer bailout, is sending 1,000 jobs to Singapore, while reducing its workforce by as many or more people.
Corporate America “reduced their domestic workforce by 2.9 million jobs during the last decade while at the same time increasing their overseas workforce by 2.4 million,” according to an article on the ESR (Employment Screening Resources) website.
Industry Hiccups
The manufacturing sector reports production and hiring activities are trending up, however new purchase orders and inventories are slowing down.
The new orders index, a tool that indicates if business is expanding or contracting for various industries, was at 49.2 percent for the month of July, suggesting a slowdown in customer orders. This is the first time since 2009, when the same index was at 48.9 percent, that there is a sign of slower growth in customer orders.
The purchasing manufacturing index was at 50.9 percent in July as compared to 55.3 percent in June.
“A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting,” according to a July 2011 report released Aug. 1 from the Institute for Supply Management (ISM), a nonprofit association serving the manufacturing industry.
The good news is that the ISM Prices Index at 59 percent decreased significantly from 85.5 percent in April, indicating that prices for raw materials are no longer moving up, giving a breather to cash-strapped manufacturers.
“Despite relief in pricing, however, several comments suggest a slowdown in domestic demand,” according to the ISM report.
While the manufacturing sector sees some bright lights, the entertainment and recreational sector is experiencing major slowdowns. People’s discretionary spending is withering because fuel, food, and other consumer goods prices are increasing.
In non-manufacturing industries, survey “respondents’ comments remain mixed; however, for the most part they indicate that business conditions are flattening out,” according to a recent ISM non-manufacturing report.
Next...Consumer Spending on the Decline
Consumer Spending on the Decline
Consumer spending is on the decline, and every extra penny is being saved for rainy days. Recent survey data suggests that 61 percent of survey respondents are curtailing their vacation plans because of the economic upheaval and subsequent recessionary period. This is a 12 percent change in consumer spending over the same period in 2010.
Narrowing it down, between one quarter and one third of survey respondents are forgoing long recreational trips, curtailing annual vacations, using the car instead of hopping on a plane, staying at home and going on short daily trips, forgoing eating out, and visiting family and friends.
“These results reinforce the New Frugality that has taken hold of the Middle Class. … But among the vacationing majority, plans are based on fiscally responsible behaviors. Saving more, spending less and reducing debt are the guiding principles for middle-income families this summer,” said Scott Spiker, CEO at First Command Financial Services Inc., an investment advisory firm, in its Aug, 4 press release.
The Deloitte Consumer Spending Index, a gauge of future consumer spending, was still dropping in June, according to a recent Deloitte press release. The index fell in May from 3.29 percent the prior month to 2.86 percent and in June to 2.55 percent, a 10.8 percent decline.
Consumers are turning into shrewd shoppers when it comes to back to school shopping. The majority of respondents to a Deloitte survey are watching energy and food prices closely to gauge exactly how much they can spend on their children.
More than half of the respondents will not go on a shopping spree, but keep purchases limited to what is most needed, and more than one quarter will use hand-me-downs and limit their shopping excursions to as few as possible.
Many tech-oriented consumers are turning to social networks and using smart phones to find the best deal for the lowest price.
“Many consumers will use their smartphones to enhance their shopping overall, but specifically to find the best price, locate promotions and discounts and track down the items they want to buy,” states another recent Deloitte survey press release.
Online Discretionary Spending Wows
“The Consumer Metrics data indicates that consumers decreased discretionary spending at the start of 2010 and that the January 2010 to June 2011 contraction was just as bad as the 2008 recession. There is s [sic] strong negative correlation between gasoline prices and discretionary consumer spending,” according to an entry on The Basis Point website, a finance and real estate blog for consumers.
With discretionary funds having taken a hit, consumers go online in search for the cheapest price.
During the second quarter 2011, Americans increased online spending by 13.6 percent over the second quarter 2010 from $33 billion to $37.5 billion, according to the Internet Retailer website. During the first quarter, consumers increased online spending by 12 percent year over year, and the trend is going up.
“E-commerce’s benefits of convenience and lower prices continue to be the drivers of the shift. … We believe the third quarter will be an important indicator of which direction this economy is really headed and what that will mean for consumer spending,” said Gian Fulgoni, chairman at comScore, on the Internet Retailer website.
