Layoffs are coming faster and with more urgency than ever before. The lack of credit and disappearing cash has left companies scrambling now more than ever to reduce head count and thus expenditures quickly. The end result is the jettison of the American employee.
More companies are laying off and the trend will continue throughout 2009. Despite what economists are telling the press, the inherent problem lies with the credit markets in the U.S.
Companies expand headcount and facilities by either tapping cash or using credit to bridge the gap between sales and invoiced payments. Customers, however, are cutting their spending or falling behind on their invoices. This means companies have to make up the difference for their customers late payments.
The problem is lenders are not lending money or are reducing lines of credit. Companies which once had money available, are finding those funds have dried up or been rescinded. Where some companies would feel comfortable using cash reserves to fill the holes, more and more are acting much more conservatively with their use of cash.
In order to quickly reduce spending, companies are resorting to the fast layoff to cut monthly costs. So employees are given two weeks pay and told to exit as fast as possible.
As long as this credit crisis lasts, there will be more layoffs, slower payments by customers and less employment. No easy answers here.
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