This week I read a particular eye-opening article written by Adam Taggart discussing the very real possibility of widespread layoffs coming to America soon.  I’ve been saying for a while now that the economy is not doing nearly as well as the talking heads of the media establishment would have you believe. In fact, I believe in time we’ll learn that at the start of 2016 we were already in a recession. Although the stock market hasn’t had a full crash (but it’s getting close), virtually all major leading (i.e. predictive) economic indicators such as the price of oil and other commodities, manufacturing output, wholesale inventories, road/rail/sea freight movement, etc., have been indicating that the world economy has been slowing down and slowing down quickly. Just look at this list of such signs recently put out by Michael Snyder :
2. The Baltic Dry Index just hit yet another brand new all-time record low. As I write this article, it is sitting at 303.
3. U.S. factory orders have now dropped for 14 months in a row.
4. In the U.S., the Restaurant Performance Index just fell to the lowest level that we have seen since 2008.
5. In January, orders for class 8 trucks (the big trucks that you see shipping stuff around the country on our highways) declined a whopping 48 percent from a year ago.
6. Rail traffic is also slowing down substantially. In Colorado, there are hundreds of train engines that are just sitting on the tracks with nothing to do.
7. Corporate profit margins peaked during the third quarter of 2014 and have been declining steadily since then. This usually happens when we are heading into a recession.
8. A series of extremely disappointing corporate quarterly reports is sending stock after stock plummeting. Here is a summary from Zero Hedge of a few examples that we have just witnessed…
- SHARES OF LIONS GATE ENTERTAINMENT FALL 5 PCT IN EXTENDED TRADE AFTER QUARTERLY RESULTS – RTRS
- TABLEAU SOFTWARE SHARES TUMBLE 40 PCT IN AFTER HOURS TRADING – RTRS
- YRC WORLDWIDE SHARES DOWN 16.4 PCT AFTER THE BALL FOLLOWING RESULTS – RTRS
- SPLUNK INC SHARES DOWN 7.6 PCT IN AFTER HOURS TRADING – RTRS
- LINKEDIN SHARES EXTEND DECLINE, DOWN 24 PCT AFTER RESULTS, GUIDANCE – RTRS
- HANESBRANDS SHARES FURTHER ADD TO LOSSES IN EXTENDED TRADE, LAST DOWN 14.9 PCT – RTRS
- OUTERWALL SHARES FALL 11 PCT IN EXTENDED TRADING AFTER QUARTERLY RESULTS – RTRS
- GENWORTH SHARES DOWN 16.5 PCT AFTER THE BELL FOLLOWING RESULTS, RESTRUCTURING PLAN
20. According to the New York Times, the Chinese economy is facing a mountain of bad loans that “could exceed $5 trillion“.
I would add to his list of stock crashes LinkedIn, which literally just lost 43% of its value in 1 day!  So yes, I’m convinced that if we’re not already in a recession that we will be very soon – and with recessions come layoffs as companies struggle to maintain profits when sales are declining because people are saving and paying down debt instead of buying stuff. However, what struck me in the article by Adam is that it is already happening! Check out this massive list of layoffs already unfolding right now:
- Johnson & Johnson to slash 3,000 jobs
- Wal-Mart pulls plug on smallest store format, shuts 269 stores
- GE plans to cut 6,500 jobs in Europe
- BP to slash thousands more jobs in face of oil downturn
- Macy’s to cut 3,000 jobs, close 36 stores
- Sprint cutting 2,500 and closing call centers to cut costs
- Canadian Pacific Railway plans to cut 1,000 positions
- Brazil economy shed 1.5 million payroll jobs in 2015
- Pearson to cut 4,000 jobs in latest restructuring
- Barclays to slash about 1,000 investment bank jobs worldwide
- Southwestern Energy to lay off 1,100 workers amid oil slump
- Major banks are making cuts: Bank of America, Citi Group and JPMorgan Chase are trimming jobs and branches.
- Autodesk to cut 10 pct of workforce
- Caterpillar closing 5 plants, cutting 670 jobs
- VMware posts higher-than-expected revenue, announces job cuts
- AIG to cut jobs in sweeping overhaul
- Monsanto to slash 1,000 more jobs, total planned cuts at 3,600
- Instacart layoffs may be a sign of things to come
- EMC plans layoffs as it cuts annual costs by $850M
Note that nearly all of these companies are in the Energy, Finance and Tech sectors — the three biggest engines of growth, profits and market value appreciation within the economy over the past 7 years.
What will the repercussions be if those three industries go into contraction mode at the same time?
Whatever the specifics may be, the general answer is easy to predict: Nothing good.
This topic has particular relevance to me today, as my former employer Yahoo! just announced that it’s cutting 15% of its workforce (1,700 jobs) and considering putting itself up for sale.
He goes on to conclude his article with a very ominous sentence:
So, for anyone reading this who is a salaried employee, a very important question to ask yourself is: Do I have a Plan B in place if I get unexpectedly laid off this year or next?
This is a sentence I think everybody should be asking themselves. When the going gets tough, everybody is expendable, and I mean everybody. Companies will do whatever they can to stay in business, and it would be wrong to blame them. So, the question is: what should you do? Here are some things I’ve mentioned before, but they bear repeating:
- Get out of risky assets that could lose value quickly, such as stocks – in times of trouble cash is king!
- If you’re in debt, prioritize paying this down ahead of indulgences such as eating out, buying gifts for people, big vacations, etc.
- If you rent, consider renting a cheaper place
- Sell illiquid assets such as real estate that could lose value and/or become difficult to sell in a deflationary environment
- Have at least 3 months of spending money on hand (not in the bank)
- Do not have all of your money in one bank, especially one of the big ones
- Consider having a portion of your net worth allocated to gold, which tends to do well during times of crisis
My feelers are saying that this economic downturn is starting to pick up steam, that a major stock market crash is likely, that layoffs are coming to a workplace near you, and (even more troubling) that several big banks like Deutsche Bank are distressed, a collapse at any of which could set off a major economic calamity.
Stay alert, get prepared. Have that Plan B ready… just in case.
- Taggart, Adam. “Mass Layoffs to Return with a Vengeance.” PeakProsperity.com, 4 February 2016. Click Here to Read.
- Snyder, Michael. “22 Signs that the Global Economic Turmoil We Have Seen So Far in 2016 is Just the Beginning.” The Economic Collapse Blog, 4 February 2016. Click Here to Read.
- Shedlock, Mish. “LinkedIn Plunges 43%, $11 Billion Wiped Out: Where Did The Money Go?” Mish Talk, 5 Friday 2016. Click Here to Read.