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 16, 2012 2:02PM
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I hope everyone that voted for Obama gets what they wanted. When they start laying off everyone that works for a living and pays taxes how in the world are you going to get your welfare check and free phone. By the way those phones are not free, thousands of hard working Americans get money taken from them every week to pay for them. But I know you don't care.
Nov 16, 2012 1:59PM
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So far he has had 4 yr to fix it. It's at least 60% worse than when he took office. Same crap in same crap out. In 4 more yr I would expect the unemployment rate to be way to high and the deficit around 21 trillion. But don't worry, it is all Bush's fault.
Nov 16, 2012 2:12PM
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What did everyone expect. The pre-election lies about consumer spending are apparent in the numbers being released by major retailers. Obamacare will put the nail in the employment coffin. Everything has a price and Obamacare is going to cost us plenty. Pumped up markets are falling and I'm sure the Obama Phones will soon fall silent now that the votes were bought.
Nov 16, 2012 2:16PM
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BO, please pay attention...Your Policies are not WORKING!  Thank you for your time.
Nov 16, 2012 1:24PM
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It is OK.  It is all George Bush's fault.
Nov 16, 2012 2:14PM
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This is nothing compared to what is coming. Now that the arrogant socialist doesn't have to worry about re-election. First thing he will do is drive us off the fiscal cliff because it does exactly what he wants, increase taxes and cuts the military, then he will blame it on the republicans, and is anyone really surprised that the jobless numbers surged right after the election. They are already talking about the carbon tax again.
Nov 16, 2012 2:18PM
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As far as companies laying off, "Obama winning the election" and the implementation of "Obama Care" are two totally different things. Business  ( and the people who would like a job ) are going to take a massive hit. This idiocy couldn't have come at a worse time.

Nov 16, 2012 2:05PM
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For everyone that doesn't know Obama is coming after your guns. If he can disarm us then he can destroys at will. If you don't believe me just check out what Hillery Clinton is doing right now.
Nov 16, 2012 2:53PM
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This country is headed in the WRONG direction! 
Nov 16, 2012 2:52PM
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welcome to the newest 3rd world coutry-- the USA
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Yes, let's lay off more workers and shovel more responsibility back onto the ones that are still working.  We can work them longer hours, cut their benefits, and make them do more and more for the same amount of pay, so we can afford to not deal with waste and pay out big bonuses to our CEO's.  Yes, that's certainly the way to make corporate America better...   REALLY people???
Nov 16, 2012 2:48PM
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The facts SPEAK for themselves; rising unemployment, stock market sell off, Obamacare, resurfacing gun control agendas, lies and cover ups regarding Bengahzi and what about all the state petitions to succeed?!  This President is making history all right......LOCK, LOAD and HOLD ON; the worst is yet to come!
Nov 16, 2012 2:29PM
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I hear there are about 200 thousand jobs available in the FEMA youth core.  You know the domestic army Obama is creating for crowd control in case of disasters.
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 3:29PM
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And yet you independents still gave this incompetent Obama fella another 4 years.  Gee, thanks!
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 3:35PM
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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 3:52PM
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perfectly divided and completely conquered!
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?
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