Blizzard of layoffs on the horizon this winter

Jobless claims are being blamed on Sandy, but more pink slips could be coming -- and not because of the weather.

By InvestorPlace Nov 16, 2012 12:41PM

Image, Unemployment line up, copyright BananaStock, SuperStockBy Jeff Reeves


iplogoOctober jobless claims surged to 439,000, an 18-month high, fueled by Superstorm Sandy (if you believe the reports). Frankly, I'm not sure how bad weather correlates to layoffs -- in fact, some folks actually were trying to convince us that Sandy and its broken windows were "good" for the economy -- but there you have it.


I'll let other pundits pick over these numbers and argue about whether blaming the weather is legit. What I think investors need to really start watching isn't the rear-view mirror of jobs claims, but the pending blizzard of pink slips that could be hitting America this winter.


Take a look at some of the ugliness: 

I could go on, but hopefully this is painful enough.


The biggest reason for the layoffs is, unsurprisingly, a push to maintain profitability. Earnings season has been as bad as expected, with falling top-line revenue as well as smaller profits for many companies. So in the absence of growth, cost-cutting is how major corporations are looking to make more cash.


But the Q3 earnings slowdown is sure to be followed by a sharper contraction in Q4 numbers that will be reported in a few months; at least, that's the prediction, according to InvestorPlace.

And on top of the earnings slowdown, we have these joys:


Obamacare unknowns: According to execs at Papa John's (PZZA) and Applebee's -- a subsidiary of Dine Equity (DIN) -- the impact of the new health care law will, at best, limit the hours of employees and, at worst, result in lost jobs. There's no way to know if this is just more posturing -- much like the smarmy Florida businessman who failed to make good on his threat of layoffs should Obama win re-election. But it's worth noting nonetheless.


Spending cuts: A melodramatic Lockheed Martin (LMT) threatened this summer to issue layoff "warnings" to 123,000 workers for fear of defense cuts, but backed off this fall. Any real reduction at Lockheed wouldn't be that bad, and surely there's the political motive of trying to scare Congress into avoiding severe DoD cutbacks. But it's a real risk that Lockheed will have significant layoffs if spending rolls back in the Pentagon -- cuts that probably will happen in some form during budget talks, even if the magnitude of those cuts are still in the air. Other industries could face a similar squeeze as the budget talks proceed.


Double-dip in Europe: If you got tired of hearing about eurozone softness during the last six to nine months, just wait for 2013. Because now we just received an "official" report that the EU slipped back into recession. The layoffs were slower in the beginning of 2012, but now that Europe has weighed on the market for so long, you can bet that more companies will be "right-sizing" operations.


Softness at home: The unemployment claims are just one data point that should be cause for concern. The unemployment rate ticked up a tenth of a percentage point a few weeks ago. In October, retail sales declined for the first time in four months, and right before the all-important holiday shopping season. There are positive signs too, to be sure, but let's not act like America is firing on all cylinders with our painfully modest 2% GDP growth.


In other words, there are a host of reasons to think we could see the jobs picture get worse before it gets better.



Jeff Reeves is the editor of InvestorPlace.com and the author of "The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he held a long position in Apple but none of the other stocks named here.


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105Comments
Nov 17, 2012 7:31PM
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Funny during the election a reporter said unemployeement was down by 2% (Which I do not believe) so now it looks like things are worse that what we where lead to believe!  Imagine that!  An Some of you re-elected Obama?  Also its not just him its Congress a bunch of greedy folks that get healthcare for free! and do not even have a deductible!  So the big picture here???

Nov 16, 2012 8:49PM
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Crowley you are a bitch and thank you for making Obama get another four years because you had to stick your lying two cents in and save this bastard.
Nov 16, 2012 8:48PM
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Hey MSNBC, NBC, ABC, CBS, CNN you lied.  Obama lied, Biden is just plain stupid.  Reports before election saying things are getting better saved this good for nothing President if the facts were reported this good for nothing piece of crap would be packing his bags and put back in chains according to the Racist Biden.  but now we the American population is in chains due this idiots policies. 

Thank you **** young people, Hispanics, and of course the African Americans thank you for your racist vote for Obama since you all vote for color not for the man.

Nov 16, 2012 8:01PM
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Let's see....there are at least 2 states that were pretty much wiped off the map, & otheres that are out of electricity, & have infrastructure problems, but this guy doesn't believe that the hurricane is the main reason for the rise in unemployment. And then there are the saps mixed in that will take any bad news about the economy, or anything else to state "If Romney had won this wouldn't have happened" or my favorite "I hope everyone that voted for Obama is happy" Just goes to show the countries full ****es.
Nov 16, 2012 5:48PM
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It appears that everyone who had been living in the Republican echo chamber has migrated over to this comment thread.
Nov 16, 2012 5:16PM
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  Don't these big corporations realize that the more people that they lay off to up their profits, the fewer people there will be to buy their products. Which will result in more layoffs! It's a visous cicle that they created. They're cutting their own throats!!
Nov 16, 2012 4:37PM
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My take on Obama Care is that something had to be done to stop the growth of health care costs since the Republicans were never going to do anything about what the Health Care Industry and the Drug companies where doing to the cost of health care.  Nice and easy solution to blame the public for wanting to be healthy and take care of instead of the profiteering health care and drug industries.  The cost of health care and drugs have gone up much faster over the last fourty years than the cost of living.  The health care industry has operated without much interference from the government, so they have been able to rake in the profits without worrying that there products and services were worth their costs.

 

Making people pay premiums for health care will eventually reduce the cost of everyone's health care premiums.  Those without health care can simply go to a hospital for treatment and then those costs are passed on to those who do pay for health care.  America pays more than any nation in the world for health care, gets the least for the money paid and has the poorest performance than the rest of the world.  I would think that the people in America have to be thinking that there is something wrong with the current system.  Keeping the old system was getting us nowhere but to the poor house.

Nov 16, 2012 4:02PM
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I wonder how many independents and democrats would vote for ending the war on drugs (saving lots of money), ending the empire and bringing our troops home from overseas(saving us lots of money), ending the department of education(saving us lots of money), ending foreign aid to oppressive governments(saving us lots of money) even if it meant cutting back on welfare after the economy picks up? Now this sounds like a limited government that can unite us instead of divide us.  Does it not?
Nov 16, 2012 3:52PM
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perfectly divided and completely conquered!
Nov 16, 2012 3:51PM
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Elections are not decided neither by hard-core conservatives nor liberals. These have been very difficult for me, especially on local level (as I live in a state where currently doesn't really matter who you vote for president). Plenty of people are not happy with the current administration but is difficult to expect a win when the agenda sounds like "health care for the rich, taxes for the rest", haha. 
Nov 16, 2012 3:48PM
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Hoover is to FDR as Bush is to Obama.  Historians like to state one got us in and the other got us out.  Reality is that one just continued the same Keynesian policies started by the first.  No matter who controls what branch of governement...Keynesian economics rule.

Nov 16, 2012 3:42PM
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Thank you APPALLET for your words of wisdom.  It's these other backwoods twits like Randy, Bloomy, and Women4 who just make a person sick to their stomach.  Bitch and moan, bitch and moan like my 90 year old mother.  "The World is coming to an End", yah right, all because of One Man.  You Chicken Littles need to crawl back into your caves and stay there.  The High-Tech world in which we live in is just Waaaaaaay too much for your SIMPLE MINDED BRAINS.  There is an election backlash right now that will cost a few jobs, but they will be back and the economy will continue to grow.  If the Scrooge CEO's would bring back the $2.5 Trillion in off-shore cash that they are sitting on and invest it in America, then things will improve that much faster.  As for gun control.  Geesh, how many times are you going to keep bringing that up.  As it was stated, it will a Constitutional Amendment to change it, and it WILL NOT HAPPEN!  So be happy that you can sit in your Mother's Basement and hold on to that AK-47. 
Nov 16, 2012 3:38PM
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If you people who voted for obama get laid off.( Probably not as you are probably already on welfare ) you are getting what you deserved. Believe me the money for your wefare checks WILL run out.Maybe a year or 2, but it will.
Nov 16, 2012 3:38PM
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Well, the need of a solution came from the health insurance prices rising 10 - 15% a year. 
I do not think the healthcare legislation is the reason for these layoffs. In this job market private companies did not have problems passing the increased cost of health care and retirement to the employees and they do not have problems passing any tax increases now as well. 
I am actually more concerned that as the penalty (or tax, or whatever is called) for not buying insurance is too low (1% of income) compared to the price of the insurance and that, combined with the guaranteed issue might push some people into not buying insurance thus compromising the whole idea.  
Nov 16, 2012 3:35PM
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Sandy my $((.  We tried to tell you crazy libs that the worst is yet to come.  So what do you do, go out and vote miserable excuse for a president back into office.  Tighten your belts folks it is going to be  rough one.
Nov 16, 2012 3:29PM
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And yet you independents still gave this incompetent Obama fella another 4 years.  Gee, thanks!
Nov 16, 2012 3:24PM
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not only should obama be arrested for treason against this country, as well as pelosi, reid and the rest of those fckin' pig communists, but all you idiots that voted for the redux of the osama regime should be as well, I never thought I'd live thru the demise of America, but my father told me years ago this nation will suffer the socialist disease and be crippled and finally destroyed by it and here we are 20 plus yrs later, HE WAS RIGHT!!!! It took a man who came from Krakow Poland, came here with nothing and became wealthy, to see what was coming, but with hard WORK and determination, he succeeded, but now we've got welfare cases left and right draining this nation dry, the 'do nothings" and "demanding somethings' and not WORKING TO GET IT!!!! John Q. Public has to foot the bill for this shiiiiit!!!

 

now people might as well stay in Europe don't bother coming here, we're in the same boat they're in, but a person living under the tryanny of communism knows exactly what it is, "progressive" "liberal" all mean COMMUNIST. period. and now you scumbags are living the nightmare you voted in, and I say GOOD!! as long as you get fcked as well, I'm content in knowing it, at least you don't escape this tyranny either!

Nov 16, 2012 3:17PM
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There is no rising unemployment just more people looking since the election. All the people that wanted Romney wanted Bush in 2004 . Well look what happened there i hope you are happy with yourselves so quit bitching. I've made my own job for 45 years doesnt matter whos in charge Dems Or repubs. I could care less . Get off your dead a$$es and make your own job unless your too stupid to know how to do anything . I'm sick of your bellyaching. As far as your guns it would take an act of congress and a change in the constitution I don't think thats gonna happen. Neither did voter suppression or no womens rights . So shut up.
Nov 16, 2012 2:56PM
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just think-----had romney been elected -today we wouldnt be ----16 trillion in debt,about to go over the fiscal cliff,we would all have good paying jobs with health coverage,retirements package and a secret bank account in the cayman islands-------if only romney had one------------------yea right !
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