Cut Their Hours in Half… Give Them Unemployment Benefits… and Still Count Them as Fully Employed! – Wall Street Underground

By Nick Guarino | February 21, 2010

Here’s the latest trick. It is one of the worst.

State employment agencies (run by government) are telling companies, “Instead of firing people, cut everyone’s hours. You have 100 employees, and need to go down to 75. Instead, keep all your employees, but cut everyone’s pay and hours. Share the misery.”

In essence, you have turned your entire labour force into part-time workers. But they are still officially “employed.” It’s another way to keep the official jobless numbers down. And it’s another sign of the future in store for American workers.

We see this statistically. The average work week keeps shrinking. It has dropped from 44 hours down to a record low 33. It’s still falling. Employers are turning full-time prosperous workers into part-time starving wage slaves.

Things get uglier. Some state agencies now give partial unemployment benefits to these supposedly “employed” people. Yet they still don’t count them as unemployed!

Say you were making $1,000 a week. They cut your hours in half. Your pay falls to $500. Government figures what your benefit would be, based on the $1,000 a week you used to make. They kick a fraction of your pay cut to you, out of the unemployment benefits pool.

This does two things for the bureaucrats. First, they get away with not reporting how bad the jobs market really is: by hocus pocus government accounting, they say you’re still fully employed! And two, they pay partial benefits instead of the full unemployment benefit.

But these bogus unemployment figures can’t fool the markets for long. Millions of people were already barely able to make their mortgage payments, even when they got full pay. Now they are making far less. There is no way they can make their payments. This puts even more pressure on the dead-in-the-water housing market.

My friend, housing values have only started their plunge. They will drop a whole lot further. The soaring foreclosures, job losses, and declining wages make this a guaranteed event. Nothing can stop it.

Got a house? It is going to drop in value, big-time. This is 100% for sure.

So why are you still struggling with it? Do you believe the worst is over? You believe prices are going up? You think the tooth fairy’s going to come, wave her magic wand, and create a housing recovery?

Look, the whole world is going broke. People from China to India are going broke. Same in the United States, England and Europe. Even the sheiks of Arabia are going broke on their real estate. Do you really want to join them?

We are seeing the impoverishment of mankind. Like it or not, that’s reality. Global warming is not our problem. Global impoverishment is, the spreading global depression.

Don’t let them shit you. Millions are headed for starvation. For bread lines. We are entering a new dark age.

The displaced, recently-impoverished former middle class keeps getting bigger. But the cameras stay well away from them. Why doesn’t CNN tell you about the massive, record-breaking job losses? About the runaway foreclosures and the spreading depression?

My friend, there ain’t no recovery. We have a wipeout of epic proportions. Vast layoffs are briefly helping the bottom line at some companies. But you cannot build your business by firing your employees. Eventually you fire your way to bankruptcy.

Say you got a big company. Short-term, you can cut some costs, by not replacing your inventory. You cut even more costs, by firing people left and right. Eventually you fire the future of your business. You might gain a small amount of temporary profits — right before you file for bankruptcy.

General Motors is a great example of this. So are Ford and Chrysler. Chrysler has no chance of surviving. General Motors’ deal for Opel is falling apart. Their deal for Saab is falling apart. Their Hummer deal is languishing. Their sales volume is down 28% over last year. And they claim their business is improving! Sounds like banker accounting to me, where losses are gains.

Eventually you fire everybody there is to fire. Your unemployment rate stabilizes. But that is not a recovery. It is like a major league baseball player, whose batting average falls from .250 to .125 and then stays there. It’s an ongoing disaster, even if it’s not getting worse. That is what happened to the American auto industry.

Do not be fooled by some good numbers that come out from time to time. Remember we are over a year into this wipeout. So slight upticks, compared to a year ago, do not mean the wipeout is over. For that, we need to see huge, sustained, multi-year increases. Nothing like that is happening.

On balance, unemployment will keep going higher. Real unemployment, that is. Delinquency rates on loans will keep setting new all-time highs. Home values will continue to plunge.

Sooner or later the banks will be forced to foreclose on the properties that people have stopped paying on. Kicking and screaming all the way, they will have to record the losses. Please note that commercial loans are also going bad, in ever-increasing numbers. Banks are not recording or dealing with those bad loans either. All this will catch up with them. It always does.


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