Call it massive deflation. Read this stuff>>
Citicorp (CCI) kicked off the trend on October 21, saying it would dismiss 9,000 of its 90,000
employees worldwide as part of a massive restructuring designed to cut costs and improve the
efficiency of back-office operations.
The layoffs, which will take place over the next 18 months, would be offset by the creation of 1,500
new jobs, bringing total cutbacks to 8.3 percent of the bank's work force.
Silicon Graphics Inc, the high-end graphic computer concern, said on October 29 it would be firing up
to 1,000 workers. Cadbury Schweppes's U.S. beverage unit, Dr. Pepper/Seven Up Inc, said recently
it would cut 10 percent of its U.S. work force, about 110 workers, by the end of 1998.
On November 3, Levi Strauss & Co, the blue-jeans manufacturer, said it would shut down 11 of its
37 plants and cut 34 percent of its North American labor force.
The layoffs at the clothing concern were expected to total 6,395 people out of a global work force of
37,500.
On November 5, imaging giant Eastman Kodak Co said it may cut 14,000 jobs, slash costs by as
much as $1.0 billion, consolidate several business, and expand joint ventures.
''In some cases, it reflects the fact that the recovery isn't even. Some industries are not doing as well
as others ... (but) at this point, it does not in any way indicate overall economic weakness,'' he added.
Pundits said the new economic environment, in which global competition is getting stiffer than ever,
does not give companies the luxury of burdening consumers with higher prices as a means of keeping
earnings high.
INVESTING OR SAVING?
This so-called new paradigm has had tremendous impact on both the outlook for the economy as a
whole and on Americans' financial behavior.
People don't talk about ''saving'' anymore. The buzzword of the late '90s is ''investing.''
The concept of putting some money aside in safe havens, such as Treasury bills and savings
accounts, is long gone as Americans now get most of their financial kicks from mutual funds and
equity retirement plans, such as 401(k) programs.
Companies use their stocks, and the price of their shares for that matter, to lure skilled personnel into
working for them. Bonuses and share acquisition plans are the portrait of the late century U.S.
corporate labor market.
HIGHER WAGES OR HIGHER RETURNS?
Returns from those investments, analysts said, have increased Americans' wealth, and held back
many of them from requesting higher wages.
That, coupled with the virtual inability of companies to raise prices, has helped to keep inflation at its
lowest levels in 25 years, while growth has been brisk and robust.
Many analysts see that phenomenon as the main reason why the Federal Reserve has kept monetary
policy unchanged since March 1997. The federal funds rate is currently targeted at 5.50 percent. The
Fed's policy-setting body will meet next on interest rates on November 12.
But what about those workers from Kodak, SGI, Levi Strauss, and Citicorp who recently learned
they will soon be out of work?
Well, some experts said those workers should not meet much difficulty in finding new jobs since labor
markets remain very tight, with the unemployment rate currently under 5.0 percent.
Others said, however, those layoffs could be further evidence of a trend that has long been shaping
up in the U.S. economy: companies are more and more looking for, and as a result, offering, fatter
paychecks to skilled workers while cutting down on their non-skilled personnel.
''There is a little shift into the more skilled labor. Companies don't need as many unskilled people as
they used to because they have these great computers controlling everything,'' said an economist at
the Federal Reserve who asked not to be named.
''You're shifting into a different type of employment in several major industries,'' the source added.
''And this is not going to end. It could be just the beginning, actually.'' You think people are still going to "invest" when they are hungry? Game over. |
