Friday brings us the September unemployment report, but Bloomberg reports on a disturbing indicator this morning. According to one industry analyst, announced job cuts rose 212% from the previous September and hit a two-year high (via Instapundit):
U.S. employers announced the most job cuts in more than two years in September, led by planned reductions at Bank of America Corp. (BAC)and in the military.
Announced firings jumped 212 percent, the largest increase since January 2009, to 115,730 last month from 37,151 in September 2010, according to Chicago-based Challenger, Gray & Christmas Inc. Cuts in government employment, led by the Army’s five-year troop reduction plan, and at Bank of America accounted for almost 70 percent of the announcements.
While the bulk of firings are not “directly related” to economic weakness, they “could definitely be a sign of more cuts to come,” John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. “Bank of America is not the only bank still struggling in the wake of the housing collapse, and the military cutbacks are probably just the tip of the iceberg when it comes to federal spending cuts.”
As Congress begins to pare back federal spending, we’ll see more of these kinds of stories, because those cuts will add to job-loss numbers. Had we been operating our bureaucracy on current dollars rather than borrowing against the future, the return of capital to the private sector would have created more opportunities for job creation that would have absorbed the losses. Instead, as it will only reduce future borrowing, the balancing impact of those cuts won’t be seen until much later, and likely not recognized when it occurs.
The cuts to the private sector are another matter. Banks have had to deal with the bad paper on their books for the last two years, and now that the foreclosures have finally begun to proceed on bad loans, the banks may finally start strengthening their balance sheets. However, the costs of the Dodd-Frank “reform” bill passed last year will continue to weigh down the financial sector, and as Bloomberg notes, BofA won’t be the only bank looking to cut costs.
The job-cut announcements claimed 126% from August, a month in which the economy produced a net job growth of zero. Bloomberg’s panel of economists think that September will produce a net gain of 60,000, far below the number needed to keep up with population growth, and that the jobless rate will remain at 9.1%. Tomorrow’s weekly jobless claim report will provide a little more clarity on what the numbers Friday may show, but at the moment, I’d bet lower on net job growth and higher on the unemployment rate.