Rise in Unemployment Tops 22-year High

Last week's unemployment figures unnerved the stock market, but we know - by now - that that unnerving didn't really last. It's hard to say what the market will react to at all, let alone to what it will react positively or negatively. The fact remains, however, that unemployment is rising faster than ever and this must have real economic impact regardless of what the stock market index figures say today or next week.

I was reading an article on the subject and it's sometimes worrying to see how an author or analyst will often look for data to confirm or undermine whatever the headlines say. For example, this latest jump in unemployment, which clearly spells negativity for the economy, was discounted by a researcher who found that similar occurrences in the past were followed by significant gains in the stock markets within the following 12-months. Should we, then, be excited by the news that more companies are cutting their workforces, more people are losing their jobs and consumer spending will ultimately be forced down?

MBA Interest Surges In Slowing Economy

What are more and more people thinking about as the economy continues to slow? You guessed it, school. The MBA is, of course, at the top of the list for many professionals who are looking to take advantage of the declining opportunities in the marketplace to prepare themselves with a business education - readying themselves for when the rebound come-around.

The MBA Tour, a worldwide tour that brings together between 20 and 25 business schools in one place, at one time, has grown in popularity; attendance was up 30% last year and Peter Von Loesecke, the founder of the Tour and MBA graduate from Cornell's Johnson School, believes that it will continue to grow even more rapidly as the economy worsens. It makes a lot of sense.

A graduate business education, like any other post-grad degree, requires that you take time away from your career and suffer the opportunity cost of that lost income in addition to the, sometimes, staggering tuition costs and related expenses. Clearly, then, the best time at which to take that on is when the opportunity costs are minimized. Whether they realize it yet or not, prospective MBAs are behaving like trained business people already; once they graduate, they'll understand the economics behind their prior motivations.

The Companies MBAs Love

It's not much of a surprise really; you could probably guess many of the companies that made the list, but there's a great little article, here, that outlines the top-25 companies for whom new MBA graduates would love to work. What I would not have guessed, however, was that Google made the top spot - it's the #1 most desirable employer according to Universum, a research firm that publishes the list for Fortune.com.

Of course, I would have listed Google on the list as well, but maybe not as #1 - ranking McKinsey, or another big consulting firm, instead. Maybe this is a sign of things to come - a greater focus on business innovation rather that resume-prestige? On the other hand, maybe it's just a normal reaction to desiring the most talked-about names - Google certainly does qualify for that.

Disconnect Between Wall Street & Main Street

I don't know about the rest of you, but I find it funny when I see two headlines, one after the other, that contradict themselves in evaluating the state of the economy. One will say something like "The stock market rallied today after news of..." and the other will read "Consumer confidence reaches all-time low." How can both be true?

Here's something to ask yourself: if unemployment is rising, people are losing their jobs. If housing prices are falling, home equity is likewise falling. Consumer debt, as everyone knows, is rising like at no other time in history. All these things point to far lower incomes, so where is the money coming from to support the stock market rallies? Wouldn't it make sense that the declining wealth of the masses would result in a withdrawal from the financial markets to help prop-up their other expenses - like food and shelter?

There's no doubt that the world, as a whole, is not suffering the same economic declines that the US has seen of late, but many indicators point to this only being a delayed. These economic woes are not exclusive to the US; in today's global marketplace, no one economy, especially one the size of the US market, stands alone in either a rally or decline. We grow and shrink together - like it or not. It could be, then, that investors in markets that have not yet seen declines in their own markets are pouring more of their money into the US as a bet on its ultimate recovery. There dollar is certainly undervalued compared to its historical average so that could be one reason, but it all just doesn't seem very clear. Any thoughts?

Bonuses & the U-Shaped Recovery - What to Expect

On the bright side, the job losses on wall street are far less than they were following the dot-com bubble burst earlier this decade. While financial institutions shed about 17% of their forces, those same institutions have only cut about 3% during this latest downturn. Unfortunately, there's a downside to this story.

The downside is that many, if not all, are expecting many more cuts to come. You may have heard people referring to a U-shaped recovery; well, were only still on the left-side, the downward side, of that 'U'. It will essentially be a very slow downward slide that will see an increasing number of jobs lost before we hit the trough of this business cycle. Worst yet, it will be an equally slow climb back up. So, who among us are the most at-risk?

You guessed it; the higher your salary and/or bonus, the more likely you are to get a pink slip. It's no secrete that wages are the #1 expense for financial institutions and they're losing money like a leaky rowboat. To hedge those losses, their first act is to cut their expenses proportionally and the story seems to be that there are many more write-downs to come - more paper losses at these firms necessarily mean more job losses for those working there.

The best thing to do is to stay focused on your long-term career goals. Your career is not your job; it's the union of your experience and education. Losing your job does not represent a loss of your career; it provides you with the opportunity to explore areas that you haven't had the time to review in the past. Use every opportunity to enhance your experience and education and your career will continue to excel.

B-School Students Anticipating Hurt After Graduation

With the up-coming graduation season, the pressure is mounting on graduates from business schools around the country (and the world, for that matter) to find the high-paying jobs that will help pay for those hefty school loans. Unfortunately, the economic turmoil of the past few months paints a hazy picture and after reading this article, it looks as though graduates are going to get an introduction to what they can expect as part of their graduation ceremonies.

I remember when I was graduating from business school and it's hard not to have lofty expectations. You've just spent a small fortune on an education that you sought purely for its ability to help boost your earnings expectations; all that, after leaving the workforce and suffering the opportunity cost of that lost income. A MBA is an expensive education, like most post-grad degrees, actually, and it's difficult to blame graduates for desiring the six-figure salaries that they've been trained to seek. The reality, however, may be a shocker and in listening to keynote speakers at their graduation ceremonies, graduates will have a window on what they can actually expect to face when they return to the real world.

The economy is hurting. Wall Street is laying-off thousands. Foreign markets are mounting pressure on almost every domestic sector. While getting a speaker who will motivate and inspire graduates may leave them with a warm and fuzzy feeling, it's unlikely to set proper expectations. Having graduated during the last economic slowdown, I personally feel that getting a realistic picture is far more valuable. These are highly educated and ambitious people; they don't need people to motivate them - they need people who will share their honest insights and it sounds as though that is exactly what they will get.

Democratic foreclosure-prevention package - OK'd

With all the talk about the hundreds, yes hundreds, of billions of dollars made available each month by the Federal Reserve to help financial institutions survive the worst of the continuing credit crunch, it seems that the little guy may finally get something too. The U.S. House of Representatives approved a Democrat-sponsored foreclosure-prevention package that will essentially guarantee mortgages if banks cut principals so as to lower the payments on those loans. With foreclosures consider to be one of the key catalysts for the slowing economy and financial woes on Wall Street, this should certainly help everyone involved.

No one benefits in a foreclosure.

For the little guy, that's you and me, this means that banks should be just a little more willing to work with us to avoid foreclosure. The banks don't want to foreclose; besides all the transaction costs involved, it's just a hassle. They need to come-up with the paper work (both financial and legal) and ultimately boot some family out of their home. With their expectation to see only part of their loan returned to them given the current state of the real estate market, it's a lose-lose proposition for everyone involved. This new program gives them an out.

Assuming that banks are willing to do their part and cut the principal amounts on the loans, then those loans will be guaranteed - essentially eliminating their risk of holding-on to the mortgage and giving the borrowers (i.e. homeowners) a little more slack with which to retain ownership and make their monthly payments. The key here is that everyone needs to still do their part. The banks aren't getting something for nothing; they'll first need to make their own judgements as to who's mortgages should be cut and kept vs. those that they'll foreclose regardless.

Similarly, homeowners can't run away from their responsibilities. With news of people choosing to burn their homes or drive their cars into lakes and rivers so as to collect on insurance policies and avoid further payments, there doesn't seem to be a better time than the present to offer something to us little guys. The economic slowdown will continue for some time. More businesses will close and more people will lose their jobs. At least its nice to know that it's not only Wall Street that has the attention of our government.

Unemployment Trending Upward

It's an election year and no one wants to admit it, let alone talk about it, but the reality is that the employment outlook is not pretty. Since early last year unemployment has been steadily rising and shows no signs of slowing down - regardless of what the politicians want us to believe. Oh, and if you think that unemployment can't go much higher than it is already, then look at the included graph as a comparison against what it used to be during this decade's first recession.

Unemployment, for the sake of unemployment, sucks. What makes this picture that much worse, however, are all the other factors that are still mounting an attack on the lowly consumer. Rising fuel costs; rising food costs; falling home prices... maybe worst of all, rising consumer debt. You can't really blame people for drawing on their lines of credit to make it through the tough times, but I'm sure that you too can guess what will happen when the cost of credit begins to rise as it is expected to do in the coming year. All that debt will suddenly become increasingly expensive leaving everyone scrambling with  even fewer options to cover their living expenses.

The picture is gloomy, I know. It doesn't need to be as bad as it is though. The most important thing that people can do is to recognize the true state of the economy and act accordingly. Yes, it's time to cut-back on spending and increase savings for those sure-to-come rainy days. Every business owner knows that to survive the troughs you need to lower expenses along with falling revenues; it's just too bad that not every person has the same business know-how to make similar adjustments in their personal finances.

Everyone believes that they're underpaid...

I'm sure that no one is surprised by the title of this post; we all believe that we're underpaid. More precisely, we believe that others are paid better than we are. The reality, however, is likely far from the truth. This differential between what people earn and what we believe that they earn comes from the fact that no one speaks about their earnings - we infer their earnings from their spending behaviour. With personal debt levels at all-time highs, this is undoubtedly a poor indicator.

For those of you unaware, I'm a Canuck. Up here north of the border, the average salary is about $27,500 for an individual living alone (this excludes students working part time or summer jobs that would otherwise drag-down the average). Shocking, isn't it? With all the talk about six-figure salaries, the reality is that a six figure salary more than four-times the average salary.

Most people spend beyond their means. They spend more than what they earn and incur massive debts in order to live like they believe their neighbors can in-fact afford to live. In trying to keep-up with the Jones', it seems that we're all chasing a lifestyle that very, very few of us can actually afford.

What does this all mean for those currently on the job hunt? Well, for starters, it should give pause in consideration of what sort of salary is actually deserved based on your experience and abilities. Of course, we all believe that we're above average - which, of course, can't be true - so we all demand salaries that are above average. There's no harm in believing in ourselves; it's a positive thing. I suppose that I'm writing this not to suggest that anyone suppress their earnings expectations, but rather than we think twice about what it is that we're actually worth. Think about it from the perspective of your employer or potential employer. What sort of value are you going to generate for them? If you're worth six-figures, then that would imply that you can generate at least that much profit (not revenue) for the company; can you?