The hits keep on coming…

The hits keep on coming…

The latest Department of Labor report that shows 240,000 jobs were lost in October alone wasn’t great news.  But if you read the historical data behind these numbers, the picture sounds bleak:

-At a total jobless rate of 6.5%, we’re at a level that hasn’t been seen since March 1994.
-September’s losses of were the largest monthly job loss total since November 2001 – which as you’ll recall was the start of the dot-com bust.
-1,179,000 jobs were cut in the last 12 months – a 12-month loss window that large hasn’t been seen since 2001
-Most economic indicators signaling even more difficult times ahead, job losses will likely deepen and continue through at least the first half of 2009.
-“We may be in a severe recession, in which case these job numbers are not even big yet,” said Robert Brusca, economist at FAO Economics; suggesting monthly job loss totals could grow in excess of 300,000 an unemployment could rise to around 7%
-Interestingly, the female unemployment rate as of October was 5.8%, it was 7.1% for men.

To add more good news, Brian Dunn, president and chief operating officer of Best Buy, was quoted today saying “In 42 years of retailing, we’ve never seen such difficult times for the consumer”
-The Dept of Labor’s report echos this ominous sign indicating retailers trimmed payrolls by 38,000 workers last month – right before the holiday season that typically counts for 50% of yearly profits.

Matt’s Oct 2008 prediction hit rate:
1. Stocks will have a sharp decline, and continue to decline for rest of the year with no meaningful recovery for 2 years.  – After a little bubble in late Oct, it has gone down again and looks like I’m still on track.  Below is the dow tracked since I made the prediction.
My new concern is that we’ll see another big 1000-2000 point drop on/after the holiday as it becomes apparent how bad the retail season is going to be.  Could be another big tumble before Q2 of next year.  I don’t think people realize how bad the holiday shopping season is going to be.  People are already cutting off the credit card use, so with folks just using cash – you better believe there will be a lot less buying.


2. Downward Housing spiral is going to continueS&P’s numbers for August indicate a continued decline for most cities; but we’ll need to get a few months under our belt to say for sure.  Still, most are seeing a month-to-month decline in value of 0.0-1.0%.  Still, Portland saw a very slight uptick between July and Aug.
3. Job losses will continue – Right on the money with this one.  My prediction to a friend was we’d be at 7% unemployment by Q2 of next year – looks like we might hit it sooner than that.
4. Depression is a real word – and we may just get one – All the indicators are pointing towards a recession in the same range as the dot-com bust a few years back.  And that was an economy without the debt-saddled home problems we have now.  This one is shaping up to be worse by about a factor of 50% by my guess.
5. Days of easy credit and easy ownership are over – well, duh.

So, tips:

1. Cut your discretionary spending as much as possible.   Cash is already king; but if you’re sitting on a pile of cash towards the end of this (whenever that will be) – you’ll be able to buy up stocks/property/etc at fire-sale prices.
2. Save up an emergency fund of at least 3-6 months.  I’d say even more if you can as this unfolds.
3. Hold off on purchases – even if you can afford it.  Right now everything is going down – and the longer you delay your purchase, the better the deal you’ll get.  At least for the next few months.  I’m already seeing this in electronics – and car dealers are likely bending over backwards right now.  Depends on the item you’re buying (houses are different than home electronics); but it’s a good rule to follow.  I predict some amazing after christmas blowouts.
4. Plan your contingencies – are you in a job area that is already teetering?  If so, they will really be getting creamed by early next year when things will be worse.  Start making those contacts with other employeers, friends, update your resume, start getting your linked-in and other networking going NOW.

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