America Turning Thrifty

The economic downturn was a wake-up call for Americans, known for their exhaustive spending habits, as their way of life was threatened predominantly by unprecedented high unemployment, continued mass layoffs, and outsourcing of jobs to foreign shores, as well as declining home values.

Layoffs continued with 1,623 mass layoffs and 265,147 individuals being retrenched during the second quarter of 2011, according to a Bureau of Labor Statistics Aug. 10 press release.

The unemployment rate of 9.1 percent, with 13.9 million people out of a job, hasn’t changed over the past months. Although hiring in some sectors, such as health care, manufacturing, mining, and retail trade had trended up, local governments began to retrench, with the state of Minnesota laying off more than 20,000 people.

Also, with jobs moving to foreign shores in the coming years, Americans need to tighten their belts. Corporate America is no longer moving just manufacturing jobs to foreign shores, but also white-collar jobs.

Hackett Group December 2010 research suggests that corporate America will outsource another 1.3 million white-collar workers by 2014.

June media reports suggest that Goldman Sachs Group Inc., despite record profits and having taken a $10 billion taxpayer bailout, is sending 1,000 jobs to Singapore, while reducing its workforce by as many or more people.

Corporate America “reduced their domestic workforce by 2.9 million jobs during the last decade while at the same time increasing their overseas workforce by 2.4 million,” according to an article on the ESR (Employment Screening Resources) website.

Industry Hiccups

The manufacturing sector reports production and hiring activities are trending up, however new purchase orders and inventories are slowing down.

The new orders index, a tool that indicates if business is expanding or contracting for various industries, was at 49.2 percent for the month of July, suggesting a slowdown in customer orders. This is the first time since 2009, when the same index was at 48.9 percent, that there is a sign of slower growth in customer orders.

The purchasing manufacturing index was at 50.9 percent in July as compared to 55.3 percent in June.

“A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting,” according to a July 2011 report released Aug. 1 from the Institute for Supply Management (ISM), a nonprofit association serving the manufacturing industry.

The good news is that the ISM Prices Index at 59 percent decreased significantly from 85.5 percent in April, indicating that prices for raw materials are no longer moving up, giving a breather to cash-strapped manufacturers.

“Despite relief in pricing, however, several comments suggest a slowdown in domestic demand,” according to the ISM report.

While the manufacturing sector sees some bright lights, the entertainment and recreational sector is experiencing major slowdowns. People’s discretionary spending is withering because fuel, food, and other consumer goods prices are increasing.

In non-manufacturing industries, survey “respondents’ comments remain mixed; however, for the most part they indicate that business conditions are flattening out,” according to a recent ISM non-manufacturing report.

Next…Consumer Spending on the Decline