In addition to layoffs at Summitville Tile, the family which owns my beloved Spread Eagle Tavern located here in Ohio, the Wall Street Journal also reported on a host of other job cuts at many major organizations this morning. Among the layoffs:
Home Depot, 7000 jobs
Caterpillar Tractor, 20000 jobs
Texas Instruments, 12% workforce reduction
Sprint , 8000 jobs
IBM, 2800 jobs
Pfizer/Wyeth merge, 10% workforce reduction
Some put today's major layoff announcements at just about 60,000, but there have been many more at smaller companies like Summitville throughout the nation. In spite of yesterday's and today's layoff announcements, the markets have actually been able to eke out some gains in the past two days. Hopefully this jives with our view that unemployment will once again prove to be a lagging economic indicator. In our opinion, the markets have already discounted an unemployment rate that could go as high as 10% during this cycle from the current 7% rate today. So, while it is difficult to stomach the headlines, we would repeat our advice not too become too disheartened. (But by all means, help a neighbor in need!)
On the flip side, home sales spiked to their highest monthly gain since 2002. For sure, most of the sales were of foreclosed units, but at least it is an indication that some risk taking is occurring, whether for ultimate resale or to live in. While there are those who would poo poo such numbers, it is at least a move in the right direction. (Incidentally, after the tech wreck I remember reports of alot of tech inventory being liquidated on Ebay, reports which were also discounted in a skeptical light.)
A number of companies have reported earnings in recent days and many more will in the coming weeks. I am in particular most interested to hear what Wells Fargo has to say on Thursday. They've managed the downturn far better than most banks have so far, but many in the market are very worried that the purchase of Wachovia may be a black hole similar to what Merill has been for BofA. It will also be interesting to note how early cyclical stocks like Starwood Hotels, T Rowe Price and Broadcom respond to their earnings results. If they can do well in the face of difficult headlines, it might be a sign, like layoffs, that bad news may be losing its punch and an eventual turn might be closer.