Doomwatch^TM vs. Timesizing^®

1. U.S. electric utilities are experiencing their worst credit crunch since the Depression, pointer summary (to A2), WSJ, front page.
   ...and it is likely to worsen, A&P found.
   [Compare Britain -]
   TXU's abrupt exit roils Britain's energy market - A new sign of strain in a privatized utility system, by Suzanne Kapner, NYT, W1.
   [Note the clue here - rigid and naive assumptions that privatization cures all.]

2. [the anatomy of a deepening depression -]
   Companies cut costs where it hurts: employee pay, by Kemba Dunham & Kris Maher, WSJ, B1.
   [Contrast this with the cloying happytalk right next to it -]
   Managing your career - Switching industries doesn't have to mean accepting lower pay, by Joann Lublin, WSJ, B1.
   [No, Joann, that's because even not switching industries in this depression means accepting lower pay. So why don't you just pack up your pompoms and go cheerlead in your room, or just SHADDAP.   Back to "Companies cut costs where it hurts...".]
   - Joann Lublin contributed to this article.
   [Then what's up with Joann's silly happytalk in the neighboring article? Ditch this dizzy dame in the dumpster. Or maybe it's the WSJ editors who are confused.]
   ...In a further effort to cut costs, companies of all sizes and in a broad range of industries are cutting employee pay.... For some employers, these pay cuts are the latest effort to rein in costs. Since early 2001, many companies have eliminated bonuses, conducted several rounds of layoffs, and frozen and cut salaries. But with the economy showing few signs of improving, employers in professional services, airlines, telecom and elsewhere are once again announcing substantial salary cuts.... Some companies are reducing pay as an alternative to slashing jobs....
   [Wouldn't that basically include ALL companies that are cutting pay?! And if the sinking average workweek indicates, many companies are making matching hours cuts, giving us basic timesizing, not downsizing.]
   One danger of enacting paycuts is that disgruntled employees will leave. But some employers have found those fears unfounded..\..
   [And certainly the depression is a big "help" in reducing employee departures, and more positively, doing an hourscut that matches the paycut really helps. Here are a bunch of examples of the paycut strategy, many illustrating the reluctance of employees to spin out into a depression.]
   • National Airlines, Las Vegas, is on its 2nd round of pay cuts...this time affecting all 1,500 employees, who were hit with a 10% reduction for 4 months. The company's officers - roughly 15 people - were dealt a 20% reduction for 38 months.
     [Good. They're following Lincoln Electric's morale-saving strategy = everyone sacrifices together, starting at the top.]
     In an internal memo dated Aug. 31, National Airlines CEO Michael Conway said the pay reductions "are significant," and "I sincerely hope that the number of employees who will be forced to seek other employment will be...a minimum."
     [Gee, a CEO who actually doesn't think of employees as mere "costs" to be cut.]
     The company said that concerning employee departures, nothing more than normal attrition has occurred..\.. Georgia Gallarde's paycheck just got 10% lighter. But the sales rep for National Airlines knows things could be worse. "I'm really happy to have a job," she says.
     [Hey, a realist at last.]
   • Stratagem Inc., a Menomonee Falls, Wis., provider of information technology consulting services, enacted a mandatory minimum salary cut of 6% for all of its 225 employees, effective Oct. 1. Some employees were subject to an additional reduction since customer demand for their particular skills was lacking, according to an internal company memo. Pay increases have been suspended for six months.
     [How about "until paycuts are restored"?!]
     "We found the actions to be gut-wrenching, but in the best interest of our long-term competitiveness," says Dave Whiteley, Stratagem's executive VP.
     [Fine, Dave, as long as execs are sharing the pain.]
   • At PR agency Fleishman-Hillard Inc. in St. Louis, about 250 managers, or 10% of the staff, saw their pay reduced by a range of 3-10% on Oct. 1.... A Fleishman-Hillard spokesman says the company is taking the salary-cut situation "a quarter at a time."
     [Is that "3 months at a time" or "25 cents at a time"?   Anyway, so far so good - no jobcuts - but alas, the Oct 1 paycut was not enough to completely avoid jobcuts -]
     The company...also plans to cut about 60 of its 2,300 jobs....
     [And the next case is similar -]
   • Conductus Inc., a Sunnyvale, Calif., maker of superconductor wireless systems, is in its 3rd round of layoffs; for its remaining 66 employees, it cut salaries by 15%, effective Oct. 1....
   • Deloitte Consulting. a unit of Deloitte Touche Tomatsu, this summer reduced the salaries of most of its employees by an average of 8%. "I think salary cuts are a more optimistic approach and demonstrate more of a commitment to your people," says Peter Horowitz, global director of PR. "It's not as destructive as watching your colleagues leave."...
     [Amen to that, Peter. But hey, with that great an attitude, why stop at "Global Director"? - we'd like to promote you to Galactic Director of Public Relations!]
   • At ThermaWave..\..Fremont, Calif., [12] senior executives...took cuts of between 10% and 12%, while salaries for the remaining 440 world-wide employees were frozen..\..
     [Hey, at least they're following Lincoln Electric's morale-saving strategy of everyone sacrificing together, starting at the top.]
   • Agilent Technologies Inc., a Palo Alto, Calif., hi-tech company, cut pay across-the-board in May 2001, and after restoring salaries for many workers in November of last year, again temporarily reduced pay for some in December. Starting Feb. 1, 2002, the rest of Agilent's white-collar work force had to take a 5% temporary pay cut while U.S. hourly workers were required to take off one day a month without pay.
     [At last we hear about a matching paycut-hourscut case. But this illustrates a difficulty. The "salary" concept, that supposed "blank check on your life," seems to be being used to avoid explicit hourscuts by some companies. Hopefully salaried employees are taking the time off anyway - after all, there IS generally less demand for their services in a depression.]
     That round of rollbacks ended in August. "Everyone is back on full salary," says Amy Flores, an Agilent spokeswoman.
     [Agilent is lucky.]
     As far as Ms. Flores knows, staff turnover didn't increase when salaries were reduced. "My guess is that nobody had anyplace else to go," she suggests. "People figured, 'At least I have a job.' " Agilent has no plans for additional salary cuts, she adds.
     
   Although most workers would prefer a salary cut to losing a job, it is nevertheless a morale-crusher to suddenly take home less pay.
   [Not if it's accompanied by a corresponding hours cut a la Timesizing.]
   Many employees feel powerless to complain. Given the tight job market, they can't easily quit in protest. A consultant at a midsize Chicago tech firm whose salary was cut by 10% - or more than $10,000 - this past June, is moonlighting at a 2nd job performing tech services for small companies and individuals in the evening and on weekends.
   [Get your hankies out, folks. This poor guy is making over $100 grand a year and he's still whining.]
   He earns between $500 and $750 per month from this side gig. "I was and still am frustrated about the pay cut," says the consultant. He adds that he could earn more money moonlighting but is "exhausted."
   [Gee, maybe paycut-corresponding hourscuts on his main job could even help this poor greedster. But then the Journal gets down to some rare death-spiral tracing -]
   Inevitably, pay cuts lead to reduced spending by employees, and taken en masse, that contributes to slowing demand for consumer goods. That can result in still more pay and job cuts - and fewer openings for those laid off. "I probably won't spend as much as I would have," says Ray Christie...CFO of hi-tech group Therma-Wave Inc., Fremont, Calif., who received a 12% salary cut effective Oct. 1. "My wife and I had been considering buying a new midrange-priced Mercedes. We decided not to do that just yet, if ever," he says.
   [Our heart bleeds for ya, Ray.]
   "Our salaries are such that we aren't going to go on the street begging for bread," Mr. Christie says.
   [No kidding.]
   "Personally, I'm a whole lot more concerned about the fact that we have been forced to lay people off than I am about my salary decrease," he says.
   [Well, Ray, we're concerned that you're so unimaginative and clueless that, blind to timesizing, you think you only have one death-spiral alternative.]
   "It makes it worse to know that the rest of the economy is struggling, so...they're going to have a difficult time finding a job."...
   [And you're going to have a more difficult time finding a market, baby.]
   

• It's the war, stupid - The loyal non-opposition, op ed by Frank Rich, NYT, A31.
  As soon as pResident Bush rolled out his [brand] new war on Iraq, the Democrats in Washington demanded a debate, and debates they got, all right.
  • There was the debate between Matt Drudge and Barbra Streisand about the provenance of an antiwar quote she recited at a party fund-raiser.
  • There was the debate about whether Jim McDermott, Dem Congressman from Washington, should have come home from Baghdad before announcing on TV that we can take Saddam Hussein's promises at "face value."
  • There were the debates about why Al Gore took off his wedding ring,
  • why Robert Torricelli took a Rolex,
  • and why Al Sharpton and Jesse Jackson took noisy offense at so benign and popular a Hollywood comedy as "Barbershop."
  But as for the promised debate about Iraq, it became heated only after Congressional approval of the pResident's mission was a foregone conclusion.
  Though the party's leaders finally stepped up, starting with Mr. Gore,
  [actually with presidential self-positioner Sen. John Kerry, D-Ma., who later cowardly caved in to war]
  most of them seemed less concerned with the direction of the nation in 2002
  [or the healthiness of provoking war in the nuclear-biological-chemical weapons age]
  than with positioning themselves for the White House in 2004 (or '08)....
  [As we've said before, if by magic Bush was a Democrat, the Republicans would have been screaming for his impeachment MONTHS ago.]

• September was anemic for retailers - Weak sales gains suggest recovery is slowing sharply as consumers tighten belts, by Ann Zimmerman & Bob Davis, WSJ, A2.
  [What "recovery"?! Let's face facts. We're sundowning into the Great Depression Revisited because, once again, we have allowed spending power to get far too tightly concentrated in the income brackets that already have way WAY more than they can spend. Which means consumer spending has nowhere to go but DOWN until we centrifuge that Black Hole of spending power and get it out to the multitudes who actually have time and need to SPEND it. To do that by market forces means we must create a paradox, a shortage of multitudes, and the way you do that is by withdrawing the huge surplus of manhours on offer in the job market. Two ways to do that -
  • Our usual stupid way, world war (e.g., WWI, WWII, Reagan's Pentagon buildup to "win the Cold War" - which could easily have gone the other way except for the double miracle of...Gorbachev & Yeltsin, and now, Dubya's dopey refusal to "let sleeping dogs lie" in Iraq), or
  • Our occasional smart way, Reuther's "flexible adjustment of the workweek," alias timesizing, meaning, adjust the workweek slowly downward as long as the unemployment rate is too high or rising. The Hebrews did it around 1500 BC when they cut the workweek from seven to six days in response to Moses' Fourth Commandment. We in the USA did it from 1840 to 1940 when we cut the workweek in half - from 80 to 40 hours - and multiplied wages, in response to the relentless injection of work-saving machinery.]

1. The most debt ever, pointer summary (to D1), WSJ, front page.
   U.S. household debt has exploded to more than 100% of disposable personal income. It's defining, and ruining, some people's lives.
   [The indicated article itself actually has a rather silly headline -]
   Debt problems hit even the wealthy - Biggest surge of borrowing is among those with highest incomes; Liquidating the 401k, by Hilsenbrath & Higgins, WSJ, D1.
   ...Worries have been mounting for a while about auto repossessions, personal bankruptcies and mortgage foreclosures; each is at or near its highest level in decades. Now, after a mortgage-refinancing boom and a slew of 0%-financing offers, there's evidence debt levels are becoming an issue for people at all levels of the income spectrum.
   [No kidding. Let's cut the headline's crap. It's not really the wealthy we need to worry about, as long as they're borrowing against trust funds or mansions.]
   Overall household debt has exploded to more than 100% of disposable income (income after taxes), which is the highest percentage on record. In other words, the average household earns in one year, after taxes, about what it owes in overall long-term debt.
   • ...Debt for the top fifth of US households hit 120% of disposable income, up from 100% in 1995, according to the Federal Reserve Board calculations.
     [But then, they're also the ones holding the IOUs.]
   • The debt burden for the bottom four-fifths of households also grew, but at a more modest rate, [rising] to 80% of disposable income this year, from 70% in 1995....
   [Note that income concentration is so intense that the extra 20%-of-income debt of the top one-fifth cancels out the missing 20%-of-income debt of the "bottom" four-fifths; the income of the top 1/5 (20% of households) equates to the income of the "bottom" 4/5 (80% of households). Furthermore -]
   The Fed said that consumer borrowing rose at an annual rate of 2.9% in August, a sharp slowdown from the 7% rate in July....
   [But that may also means a sharp slowdown in consumer spending, and a terminally steeper slowdown in the economy. Strangely, this article never provides the actual total consumer-debt figure.]
   ...Now the sluggish job market is taking its toll on borrowers...[and some of them are] liquidating their retirement assets....

2. CIA says Iraq on brink of war would use terror, by Rogers & Jaffe, WSJ, A3.
   [So the handwriting on the wall = LET SLEEPING DOGS LIE.]

1. Another sell-off brings week no. 6 of losses, by Jonathan Fuerbringer, NYT, B1.

2. 43,000 jobs lost in September, pointer summary (to B1), NYT, A2.
   Payrolls shrank for the first time in 5 months as businesses shed...jobs. But the economy does not appear to have lapsed into a new recession [because it never came out of the old one? no...] because wages kept rising [for fewer and fewer people - ed.] and the workweek grew longer [for fewer and fewer people].
   [That's the whole problem. More spending power funnels to those that already have more than they can spend in hundreds of lifetimes. Don't believe it? Then ask yourself, what kind of culture awards twenty-eight BILLION dollars in damages for ANYTHING to a single individual? -]
   California jury allots damages of $28 billion to ill smoker, by John Broder, NYT, A14.
   [Give millions and billions to a few people and keep a pre-technologically long workweek for the majority so market forces responding to a gross labor surplus give many people less and less. (The cause and effect is in the reverse order. The surplus pushes down wages and lets income funnel to the top brackets.) They keep hiding more and more of the former workforce on disability and in prison, and no one bothers to count the nationwide homeless and suicides. Here's the main article about the economy -]
   Payrolls drop as economy seems to be at standstill, by David Leonhardt, NYT, B1.

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