But, news out of places like Nortel (NT), Whirlpool (WHR), and Hewlett-Packard (HPQ) indicate the prophylactic job cuts are being made in almost every industry.

Even Dell (DELL), which made over $700 million last quarter and has $8 million of cash on hand is talking about sharply lowering expenses.

According to Reuters, "Planned layoffs at U.S. firms surged to their highest in nearly five years during October, with cuts in the financial and auto sectors leading the charge as the economic outlook worsened, a report by outplacement firm Challenger, Gray & Christmas said."

That means that the pace of job cuts could be rising at a rate faster than the 200,000 or so people who were put out of work last month. Instead of moving to 6.6% or 6.7% by year-end, unemployment could move higher that 7%.

The news also means that the vicious cycle of layoffs leading to more layoffs is accelerating. As those who are unemployed move out of the pool of consumers, GDP is undercut and companies have to chop costs further to stay ahead of falling sales.

Douglas A. McIntyre

Jon C. Ogg
August 20, 2007