WRECKED HOUSING & LABOR MARKETS
## HOUSING MARKET DESTROYED
◄$$$ TRAGICALLY THE US-HOUSING MARKET IS STUCK IN A DESTRUCTIVE CHURNING CYCLE, NEVER TO RECOVER. EVIDENCE IS SEEN TO BE OVERWHELMING AND DEFINITIVE. INVENTORY CONTINUES TO GROW, AS THE PIPELINE FOR NEW FORECLOSURES CONTINUES TO LOAD. PERSONAL INCOME CANNOT PROVIDE THE MARKET ANY TRACTION. THE STACK OF HOMES WITH NEGATIVE EQUITY ACTUALLY IS GROWING. THE VICIOUS CYCLE HAS BEEN OPERATING FOR OVER TWO YEARS, EFFICIENTLY AND DESTRUCTIVELY. $$$
Dr Housing Bubble is an excellent housing market analyst, having been plying his trade for a few years, always on the mark with good data and salient points. The Hat Trick Letter has featured his work every few months. The monster lurking in the shadow inventory features 12 million Americans underwater with nearly 6 million delinquent or in foreclosure with their mortgages waiting to fill the pipeline. The system is churning, as it produces more bank owned homes every month, destroying home equity and households like a bacterial monster. The only benefit in the mess is scoffing at mortgage payments, freeing up something like $50 billion per year for household spending. New shadow inventory to come online in 2012 will have the biggest impact on the housing market.
Banks will be moving delinquent properties into their REO inventory, which had been reduced. Banks will be selling the home inventory in fire sales, depressing prices. Astoundingly, in Southern California over 50% of all MLS inventory is now composed of short sales, where negative equity is involved. The banks are suddenly more willing to sell homes for less than the original mortgage balance, incurring massive losses. They must work to clear the market in a never-ending cycle. Details are ugly. Of those home loans in actual foreclosures, nearly half have made no mortgage payment in two years. Let us take a look at the current state of the shadow inventory. The distressed inventory pipeline contains over 5.8 million homes as either delinquent or in the foreclosure process. The pipeline is full of homes to hit the future market for sale in one to two years.
The first two columns never appear on the MLS listings. Neither does the third column, but they could quickly afterwards. The Housing Bubble doctor notes that so-called cure rates have been pathetic, as DQ moves to FC with high reliability. The process has three stages of foreclosure. 1) Notice of default is filed (at least three missed mortgage payments), 2) NTS (scheduled for auction), and 3) REO, finally seized by the bank. Homes owned by the bank take at least one year to appear on MLS listings for sale. Some analysts find false hope in the slow decline of Existing home inventory for sale. It is only part of the entire picture. Existing inventory has trended lower since 2007. It reflects roughly two million properties while another 7 million properties are ready to join the inventory parade. They consist of A) at least 90 days delinquent, B) in the foreclosure process, C) bank-owned real estate, or D) current but with negative equity. The nasty embryonic stage for inventory is the large gaggle of US homes whose loan balance exceeds the value of their homes. The owners are induced to stop payments, discouraged. They live in a trap. They are tomorrow's delinquencies in incubation.
A giant pool not viewable to the public slowly is leaking to settle into the blue category. The Existing category has room to grow from the enormous other pipelines as a feeder system. Bankers believe short sales will clear the market, but they will only hasten the push of the underwater category to delinquent, and push DQ into default. As the process churns, the home prices are pushed down more rapidly. The home price decline will make up for lost time, when the market was interfered with. The poor labor market and stagnant incomes will assure more housing market ruin in the future. The Jackass has had nothing positive to say in five years on the market, which proceeds toward total destruction exaclty as forecast. This was a remarkably easy forecast call to make correctly. Bear in mind that mortgage rates are kept artificially low by the USFed and Fannie Mae, yet the home prices continue down with momentum and force. Even a return of 0% down payments cannot stimulate the dead guy in Intensive Care, like a failed electric shock given on the gurney. These are your confirmation of a wrecked market, unresponsive to internal dynamics.
If anything, the incentive from the Federal Housing Admin will go away slowly over time. They had brought back the loan program of purchase without down payment, but that will fade away. The vicious cycle is so fierce that the push of short sales through the system will remove scoffing homeowners not paying each month, thus further depressing the USEconomy in general. The wreckage is the result of sending the factories to China, relying upon home equity loans to support the USEconomy, while developing the fraud-strewn financial sector as a phony source of income. The Chinese factories remove policy traction on both domestic business investment and consequent income. The United States is led to systemic failure by the housing industry and the catastrophic errors of economic policy.
Consider the volume of people who are squatting in their own homes. An industry analyst named Feroli offered some data. He said, "Right now you are looking at about 8% of mortgages outstanding past due, and there are about 44 million mortgages out there. So that is a pretty significant number of people who right now not paying their mortgage. There is about $10 trillion in mortgage debt owed by the household sector. That comes to about $800 billion in mortgages which are past due, with average interest rate of about 6% or a little higher. Most of those mortgages, of course, are in the early stage when it is mostly interest that is being paid [and not payments toward equity]. Therefore 6% on a little over $800 billion comes out to about $50 billion per year that is free for other purposes." As more short sales pop up on MLS every day, this trend will taper off. The USEconomy will lose its perverse stimulus from home loan scoffing by home squatters.
The United States truly is an underwater nation. Approximately 12 million Americans who own their home, owe more on the bank loan than the property is worth. The demand curve will not shift up because of the lousy labor market and sluggish incomes. A move upward on the supply side will push prices down in the search for equilibrium. This is exactly why home prices continue to fall. For example, the mid-tier market in Southern California has seen home prices fall by 8% in the last 24 months. Some strange dynamics are at work, since high demand for lower priced properties is occurring. The chart of negative equity homes in the United States is actually worse than depicted. Data is incomplete regarding junior liens like second mortgages and home equity lines of credit. They make the main body larger in nasty icing on a top graphic layer not visible.
Some arguments as vacant as a REPO'ed home are circulating. Simply to expect home prices to rise because of inflation is stupid analysis that harkens to years long past in the 1980 and 1990 and 2000 decades. Strong job gains in good paying fields, with household incomes rising, could mitigate the disaster and stop the cycle. But no national initiative is underway to bring back factories from Asia. That trend must reverse. It is not even a political priority, nor is it a presidential campaign issue at all. The global goods like fuel and food are rising in price from the desperate USFed monetary policy, which hurts the USDollar. A zinger has entered the discussion, as many younger Americans are saddled with high levels of student debt, compounded by earning less income if any income at all. They used to serve as the baseline reserve force power pack in the housing market. They are dwindling.
Perhaps if foreign buyers entered a new wave of colonialism, the housing market would revive. Tragically, in the United States, the banks control a large part of the inventory, where short sales and foreclosure sales will dominate the landscape. Look for home prices to fall to 30% below construction costs, a staggering conclusion. As Fannie Mae dumps homes on the market through private equity and other venture capital firms, expect the home prices to fall still further. Their objective is to create more home rental stock, sure to depress home sale prices as it saps demand. See the excellent Dr Housing Bubble article (CLICK HERE).
◄$$$ SEE THE EXCELLENT HOUSING MARKET GRAPHIC SUMMARY. $$$
◄$$$ SCATTERED ADDITIONAL HOUSING MARKET PAINFUL DETAILS $$$
The five worst hit US cities show great pain. Sacramento CA suffers the highest foreclosure rate in the nation. Flint Michigan has demolished 775 abandoned homes. Detroit Michigan has seen home prices fall over 50% in the last few years, from already depressed levels. Home prices in West Palm Beach Florida are down by over 50% in the last six years. Miami Florida has the distinction of having almost half the homes in negative equity territory. Over 360 thousand Miami homes have entered foreclosure since 2008. Two thirds of the bank owned homes are not on the market yet for sale, the pipeline. The Robo-Signing mortgage fraud episode stalled the foreclosure process. It has resumed, filling the pipeline. A ripe 9.5 million US homes are at current risk of default, more for the pipeline. The average duration of home foreclosure processing by banks is 674 days, triple the length of time in 2007. More for the pipeline. See the Burning Platform pictorial article (CLICK HERE).
## DAMAGE TO THE MACRO ECONOMY
◄$$$ MARCH TRADE GAP WIDENS TO $51.8 BILLION, A $600 BILLION ANNUAL HEMORRHAGE. FOR MOST OF THE MONTH, THE CRUDE OIL PRICE WAS ABOVE $106 PER BARREL. $$$
The US trade gap widened sharply in March, mostly from the crude oil price factor. Usually when the trade gap grows, it signifies an improving USEconomy since the imports rise quickly. It is a perverse effect since economic expansion means therefore more rapid capital drain, like blood leaving the body economic. The March trade deficit widened by 14.1% to $51.8 billion, reported by the USDept Commerce. The trade deficit was above the consensus forecast of Wall Street economists of a deficit of $50 billion. Economists had expected the deficit to snap back, believing that imports were held down in February due to the timing of the Chinese New Year. They overlooked what was in front of their fat noses, the oil price. In March, imports rose 5.2% while exports increased 2.9%. The bilateral trade deficit with China widened to $21.7 billion in March compared with $18.1 billion in the same month last year and $19.4 billion in February. No progress on the Chinese front. The factories sent by the US and Western corporations to Asia must come home to the US and Europe to address the hemorrhage, and to relieve the pervasive insolvency. The condition is not even addressed by US bankers, economists, or politicians.
◄$$$ PERSONAL INCOME SHOWS THE OPPOSITE OF A RECOVERY WITHIN THE UNITED STATES FOR OVER TWO YEARS. INCOME IS STILL DECLINING STEADILY. EVIDENCE IS GLARING THAT THE UNITED STATES NEVER PICKED ITSELF OFF THE GROUND AFTER THE LEHMAN DEATH. THINK FLATLINE. $$$
◄$$$ THE BROADEST CURRENT FLASH OF USECONOMIC ACTIVITY DID A NOSEDIVE IN MARCH, SIGNALING RECESSION. THE USGOVT CARNIVAL BARKERS HAVE BEEN SILENCED BY THE LOUD NEGATIVE STREAM OF NEWS. THE MOMENTUM IS DOWN HARD. INSTEAD OF WARNING OF RECESSION, THE CLOWNS HAVE TURNED INTO SILENT MIMES, POINTING TO THE REDUCED JOBLESS RATE. IT HAS FALLEN FROM WORKERS EXITING THE WORK FORCE IN DISCOURAGEMENT AND DISGUST. LIES FOLLOW LIES OF A DIFFERENT KIND. $$$
The Chicago Fed National Activity Index is a respected composite economic indicator, managed by the Chicago Fed. The index is drawn from 85 economic indicators from four broad categories of data: 1) production and income, 2) employment, unemployment, and hours worked, 3) personal consumption and housing, and 4) sales, orders, and inventories. In convincing fashion, the March negative reading saw deterioration in all four broad categories. The actual NAI Index measure was minus 0.29 in March, down sharply from a revised 0.07 in February. The three-month average, which provides a less jumpy picture of national economic growth, plunged to 0.05 from the February 0.37 level. In a couple months, the index will be flashing a loud recession signal. Production related indicators made a negative contribution of 0.13 to the March index. Consumption and housing sector continued to slip to minus 0.28 from minus 0.24 in February. Sales, orders, and inventories category added a nearly flat 0.03 to the index last month after contributing 0.04 in February. See the Daily FX article (CLICK HERE).
◄$$$ NUMEROUS NEGATIVE ECONOMIC REPORTS INDICATE A RECESSION IN THE USECONOMY. THE OBSERVER CAN NO LONGER RELY ON THE USGOVT OFFICIAL REPORT STREAM FOR ANYTHING ACCURATE EXCEPT PAYROLL INCOME AND JOBLESS CLAIMS. $$$
Sy Harding of Street Smart judges the global economic recovery to be in big trouble. In the United States, reversals of previously positive economic reports are regularly put forth. In recent weeks, unexpected declines were seen in retail sales, durable goods orders, industrial production, new home sales, existing home sales, new home starts, construction spending, new jobs creation, personal income, consumer confidence, and small business confidence. The National Activity Index (CFNAI) by the Chicago Fed, designed to measure nationwide economic activity, was reported in decline for the third straight month, dropping into negative territory in March. The overall USEconomy slowed considerably more than expected in the first quarter, with GDP growth reported as slowing to just 2.2% from the 3.0% growth reported for the third quarter. The US quarterly GDP is over-stated by at least 5% to 6%, since the official CPI is 3.0% while the true CPI (from Shadow Govt Statistics) is in the 9% to 10% range. The minus 3% recession persists in the USEconomy year after year. In Europe, the 17-nation euro-zone has already slid back into recession in several important nations.
◄$$$ THE CALIFORNIA ANNUAL BUDGET DEFICIT EXPLODED TO $16 BILLION. GOVERNOR BROWN PRESIDES OVER A BLACK HOLE WITH TREMENDOUS NEGATIVE INTERNAL FORCE. AN ERUPTION COMETH. $$$
California might be the first US state to erupt on deficit finance. The Jackass wondered why Schwartzeneggar wanted to be governor during the early days of the deep crisis. That question goes twice over for Jerry (Moonbeam) Brown, who seems like a voice of reason without the benefit of a plugged in brain. The California budget deficit was pegged at over 73% greater since the January forecast submitted by Governor Brown. The Black Hole has trapped the light from Moonbeams. In just four months, the deficit has exploded. Sales tax receipts must be puny. Home sales surtaxes must be puny. Businesses have been abandoning the state for two years. Income must be puny. The official estimated state deficit stands at $16 billion, up from the errant forecast of $9.2B at the beginning of the calendar year. See the Reuters article (CLICK HERE). New Jersey also had a shocker in disclosure for its debt status. Illinois is an utter basket case filled with red ink and unpaid bills. Arizona is fighting non-residents and outsized debt too. By end 2012, a few big US states will have erupted on budget issues and financing debt. The global bond contagion will spread from sovereign debt to state debt easily. A debt eruption is sweeping the globe, finally to hit the states in overdue fashion.
◄$$$ EUROPEAN RETAIL SALES ARE PLUNGING, THE BIGGEST DECLINE SINCE LATE 2008. RETAIL SERVES AS A LAGGING INDICATOR, THUS CONFIRMING THE POWERFUL RECESSION THAT GRIPS EUROPE. IT WILL WORSEN UNTIL THE MEMBER NATION EXITS FROM THE EURO CURRENCY AND BIG BANK LIQUIDATIONS. MONEY VELOCITY IS SLOWLY VERY BADLY. $$$
The Markit EuroZone Retail PMI Report was miserable for April. The PMI index plunged to 41.3, its lowest level since November 2008. The decline is a frightening drop down from 49.1 in March. The decline was broad, as all three countries (Germany, France, Italy) in the survey posted lower sales. The decline in France was a record. The cost pressures for retailers are at a 16-month low. The latest figure signaled the largest monthly fall in retail sales across the single currency area since the climax of the financial crisis in November 2008. For the first time since September 2010, retail sales fell across all three important nations. In fact, the rate of contraction in Germany was the fastest since April 2010. Disruptions occurred in France due to the presidential elections, a major turning point. The annual rate of decline in EuroZone retail sales was perhaps the strongest since the survey started in January 2004. A bad streak is at work. Sales have fallen on an annual basis on every single month since last June. See the excellent survey article by Michael Shedlock on Financial Sense (CLICK HERE).
## LABOR MARKET DEPRESSED
◄$$$ EXCELLENT REVIEW OF THE HORRENDOUS US-LABOR MARKET. $$$
James Quinn has provided an interview labor market review. What follows is largely his work, with minor points added or deleted with my usual edits. The fact that cannot be ignored is how many Americans are actually unemployed today. Here is some glaring truth missing from politicians and the media networks.
Over this timeframe the working age population grew by 5.7 million people, while the number of employed Americans grew by only 3.6 million. Only a USGovt drone could interpret this data as a dramatic decline in the unemployment rate.
During the Great Depression, propaganda and spin had not been perfected. Multiple definitions of unemployment did not exist, designed to confuse and mislead the public. The peak level of unemployment in the 1930 decade was 25%. The current reported level is 8.3%. On a comparable basis to the 1930 calculations, including short-term discouraged workers, those forced to work part-time, and the long-term discouraged workers which were defined out of existence in 1994 by the BLS, the real unemployment rate is 22.3% today. It feels like a depression for millions of Americans because it is a depression. It is a chronic situation in no way being addressed or remedied.
The fastest growing industries in the USEconomy include:
The surge in jobs in the last three months is being driven by unusual industries:
Quinn refers to this picture indicating a delusional, paper pushing, self-involved, obese, sickly, overly indebted crumbling empire, hardly a world leading jobs machine.
The above chart enables a quick look at job openings in industries that actually produce something. They are overwhelmed by the number of unemployed in those sectors. With sarcasm, Quinn concludes "Maybe the University of Phoenix can successfully retrain construction and manufacturing workers to be waiters, waitresses, and Wal-Mart greeters if the Federal government can funnel more of our tax dollars into student loans." See the article by James Quinn entitled "America's Epic Jobs Failure" on Market Oracle (CLICK HERE).
◄$$$ NO DETAILED ANALYSIS OF THE NON-FARM JOBS REPORT IS NECESSARY. IT IS CHOCK FULL OF THE USUAL DECEPTIONS. $$$
The farce that is known as the Non-Farm Jobs Report continued its monthly spew. The USGovt reported in April that 115 thousand jobs were created, that the jobless rate fell to 8.1%, but the labor participation rate dropped to 63.6%, a 30 year low. Revised February and March jobs brought about a lift of 53 thousand. Transportation & warehouse jobs fell by 17k, manufacturing rose by 16k, government fell by 15k. The big secret vigorish came from the deceptive Birth Death Model, which added a fictional 206 thousand jobs from the ether of small business flatullence. The B-D Model contains a staggering level of bull fecal excrement as its basis. The Jackass has studied its statistical foundation in the ARIMA(11) model. It is an auto-regressive integrated moving average model of 11th order. The AR part is complex enough, explaining the future as a mix of the very recent past. The MA part permits a high error in one month to have compensation in the next month. The integrated part is pure crapp, working with differences instead of actual raw numbers. The 11th order polynomial is 8 more than is reasonable, a great excess.
The model is intentionally created as a fudge factor device of sophisticated type. It is based on assumptions of small business creation that are baseless. Small business is cratering. The Bureau of Labor Statistics uses the B-D Model to fudge whatever final number they want. You heard that from a stat-rat pro who has studied these professional liars for 25 years. The Jackass has met three statistical analysts in federal government employ. They are near the bottom of the barrel in competence, insight, and wisdom. See Biderman rip apart the April Job Report in a YouTube video (CLICK HERE).
## DAMAGE TO THE MICRO ECONOMY
◄$$$ US CITIZENS ARE RUNNING OUT OF MONEY. COMPANIES RELEASE WORKERS, ONLY TO RE-HIRE THEM WITHOUT BENEFITS AT LOWER PAY GRADES. GREAT STRAIN IS FELT ON THE AMERICAN PUBLIC. MONETARY POLICY IS NOT RESULTING IN A REBOUND IN THE USECONOMY, SINCE THE CRITICAL INDUSTRIAL MASS IS MISSING. NO POLICY TRACTION IS POSSIBLE. IT IS NOT EVEN A PRIORITY BY LEADERS TO REGAIN THE FACTORY MUSCLE. THEY SEEM IGNORANT, BLIND, OR INFLUENCED. $$$
Richard Yamarone is sharp aware senior economist at Bloomberg Brief. He harbors serious concerns about the USEconomy, pointing to people simply running out of money. A contraction is in progress, with falling real disposable incomes, even with the absurd 3% CPI in the adjustment. Hence incomes are falling by over 5% annually, after putting the proper 9% or 10% inflation adjustment. Furthermore, most of the job creation is from minimum wage type jobs. When Yamarone speaks with Chambers of Commerce leaders, they tell him businesses are releasing workers only to hire them back at much lower wages and absent benefits. It is pure wage deflation. On the other side, professional workers who used to earn $100k annual salaries are often making half the former incomes, some in part-time positions. He has encountered heads of third or fourth generation companies, 75 or 100 year old businesses. They tell of being forced to shut the doors. The cost pressures and Chinese competition are killing them. Many are surviving through part-time hires.
Yamarone said in a King World News interview, "So you are actually seeing this collapse, a contracting on a real basis of real disposable personal incomes. If you do not have the money, you cannot facilitate expenditures. That is the core of the problem. That is what is really going on in the USEconomy. Sometimes [businesses use] a hiring firm so that they can sidestep paying unemployment benefit insurance. So that is what is really going on at the grassroots level of the economy. Very grossly different from what you are seeing in some of these numbers coming out in earnings releases. Monetary policy is very different from the days when we were an industrial behemoth. If you look at the first eight recessions after World War II, when we were a big manufacturer, back then, if the Fed saw a problem they cut rates and boom, manufacturers sparked up their idled plants and factories. In fact, the first eight recessions after World War II, it took on average twenty months for us to respond and get back all of the jobs that we lost during the recession. In a little less than two years the Fed policy response would get all of the jobs back.
However, you look at the last two recessions, in 1990/1991 and the 2001 recession, they were jobless recoveries. We do not respond to monetary policy the same way because we are no longer that manufacturing behemoth. The Fed cuts rates at the first sign of trouble and it took, during those recessions, forty months for us to get back all of the jobs we would lose. In this current recession, we are not even close (to getting the jobs back) and that is 50 months and counting." He does not identify the problem. In my view that primary change in the economic landscape is the fierce competition from China, helped along by the Most Favored Nation granted status, and massive foreign direct investment to build hundreds of factories in China. Their renaissance has removed the critical mass of factory muscle in Western Economies, not just in the United States. Blame globalization. The globalization trend has lowered costs and wrecked the USEconomy, along with that of Western Europe.
◄$$$ THE USECONOMY HAS A NEW RISING CLASS OF DISABLED. ONCE IN THE S.S.D.I. PROGRAM, THEY TEND NEVER TO LEAVE. THE QUALIFICATION PROCESS IS LAX. COSTS HAVE DOUBLED IN THE LAST DECADE TO $132 BILLION PER YEAR. DISABLED AMERICANS SHRINK THE SIZE OF US-LABOR FORCE, SEEN IN THE PARTICIPATION RATE. $$$
In all, 1.6 million Americans have claimed Social Security Disability Insurance, or SSDI, since the long painful recession began in 2007. Unemployment among the disabled has risen to a peak of 16.9% from 9.3% in June 2008, when the USGovt began tracking the data. The number of workers receiving SSDI jumped 22% to 8.7 million in April from 7.1 million in December 2007, according to Social Security data. The factor helps explain a portion of the decline in the US labor force participation rate during the period. The participation rate, defined as the share of working age people holding a job or seeking one, was 63.8% in March. It had fallen to 63.7% in January, the lowest in three decades. Disability recipients may account for as much as 0.5% of the big 2.0% drop since the end of 2007, a figure sure to grow since extended unemployment benefits expire at the end of this year. The effect is a Roach Motel Club of human disability. More than 99% of all SSDI beneficiaries remain in the program until retirement age, according to David Greenlaw at Morgan Stanley. The official program provides an average of $1111 in monthly income to eligible workers with a physical or mental impairment that will last at least 12 months or result in death, according to Social Security policy.
In just the first four months of this year, 539,000 joined the disability rolls and more than 725,000 submitted applications. The pattern is clear and noticed by officials. People apply for disability once their unemployment insurance expires, conjuring up some condition or exaggerating some existing ailment. The number of applications in 2011 was up 24% compared with 2008. A perverse effect is at work. The number of people collecting disability surged as the USEconomy contracted, with the share of the US population between the ages of 25 and 64 on SSDI climbing to a record 5.3% in March from 4.5% in 2007. Applications per 1000 working age people rose to 18 last year from 8 in 1990. Lax screening procedures, sloppy administration, and more successful appeals by those feigning disabilities have bolstered SSDI rolls. In addition, some disorders are simply difficult to verify, such as muscle pain, joint debility, and mental illness. They enable easier qualification for SSDI under program reforms. Based on current trends, 7% of the non-elderly adult population could be receiving disability benefits by 2018, according to a report in the Journal of Policy Analysis & Mgmt. The official SSDI program will exhaust its trust fund by 2016, according to an April report by the Social Security trustees. Costs have skyrocketed with the program, which spent $132 billion last year, more than twice as much as in 2000. Another source of big USGovt deficits.
◄$$$ JCPENNEY IS IN FAST RETREAT, FIRING WORKERS AND CLOSING STORES, LIKE SEARS. THE RETAIL SECTOR IS IN A TAILSPIN DESPITE ALL THE PROPAGANDA REPORTS ISSUED NATIONALLY. THE RESTRUCTURE PLAN MIGHT BE WELL ALONG AT JCPENNEY, BUT QUESTIONS ABOUT THE CHAIN'S SURVIVAL PREVAIL AMIDST DEEP DISCOURAGEMENT IN THE WORK FORCE. $$$
JCPenney CEO Ron Johnson's plan to transform the aging retail giant continues without interruption. The plan involves serious job cuts. In early May, the company cut a swath of middle managers across the country, the ultimate size of mid-level job cuts still unclear. One anonymous source says that the total may be in the thousands. JCPenney made a public statement to the effect that it will be operating with fewer layers of management. One assistant manager who was furloughed shared many details. One hundred store managers across the US were quietly laid off two days before they announced the home office reductions and the call center closing. A criterion for job cut was year-end appraisal ratings, but many exceptions were noted. Also, severance pay was often not given. Workers will not longer receive commissions, even in the hair salons. Many stores lost almost their entire middle management corps. Many related departments are being combined to reduce overhead. The catalog department is going away. Long-term employees are heartbroken, not part of the plan's new road. A very discouraging environment prevails. See the Business Insider article (CLICK HERE).
◄$$$ GENERAL ELECTRIC JOINS CISCO SYSTEMS IN BETRAYAL AND DECEPTION REGARDING LOYALTY TO AMERICAN WORKERS. THEY BOTH HAVE RELOCATED KEY FUNCTIONS TO CHINA. $$$
General Electric is moving out of Waukesha Wisconsin. It is the town's biggest employer. An executive decision has been made by General Electric to move its X-ray division to Beijing after 115 years. In addition to moving the headquarters, the company will invest $2 billion in China and train more than 65 engineers in the establishment of six research centers there. Recall that GE earned $5.1 billion in the United States last year, but paid no taxes. Also GE employs more people overseas than it does in the United States. The shame should be lightlighted from betrayal and deceit. President Obama appointed GE Chairman Jeff Immelt to head his commission on job creation. Immelt is supposed to help create jobs. The lack of leadership of this Administration is an abomination, much like the previous from 2000 to 2008. The story reminds me of Cisco Systems. Its CEO John Chambers once talked to CNBC about job creation in US. But a Hat Trick Letter subscriber wrote to inform of a major movement to create a Cisco research facility in China, shut down one in California, resulting in a loss of 10 thousand US jobs. Lies and betrayals and deception are the mainstay of US corporate landscape, not just in WashingtonDC.
◄$$$ HEWLETT-PACKARD CONSIDERS CUTTING AS MANY AS 25,000 JOBS. THE TREND TOWARD TABLETS AND CLOUD COMPUTING HAS HARMED THE MANY BUSINESSES. GAINS BY APPLE COME AT THE EXPENSE OF MAINSTAY COMPUTER FIRMS. $$$
The giant computer firm Hewlett Packard is evaluating whether to cut as many as 25,000 jobs, or 8% of its workforce. HP executives under new CEO Meg Whitman strive to reduce costs in reaction to reduced demand for computers and services. The number to be cut includes 10,000 to 15,000 from the HP enterprise services group, which sells a range of information technology services. In recent years it has been struggling with declining profitability. PC sales are dropping as consumers favor tablets like the Apple iPad and its copycat competitors. Also a trend has picked up momentum in cloud computing using less sophisticated applets that can be downloaded. The movement is away from the type of IT services Hewlett Packard provides. The company hopes to make investments in strategic, higher growth areas. Eliminating 18,000 jobs could result in savings of about $1.2 billion. Some of the cuts to the HP workforce of 324,600 may come through early retirement packages. The primary competitors to Hewlett Packard are Apple, IBM, Oracle, and Cisco Systems in the expansive market for hardware, software, and services for large corporations.