Recession

Recession hits INDIA

2009-03-07T08:53:00.001-08:00

Satyam Computers has just started giving pink slips to its employees, could potentially downsize its workforce by a whopping 4,500 employees.

Hewlett-Packard Co plans to cut 24,600 jobs, seeking to realize savings from its recent acquisition of Electronic Data Systems Corp.

Patni Computer Systems sixth-largest exporter has laid off close to 400 employees citing non-performance issues.

The country’s second-largest software-services company plans to recruit 25,000 people this year. Infosys may also recruit about 1,000 workers in China in the next two to three years.

Wipro Technologies has put about 4-5% of its workforce, about 2,400-3,000 employees, under the scanner for non-performance.

These figures which are quoted by IndiaTimes are alarming. I am sure they suggest a recession! I am not sure if under performance is one of the reason. The unfortunate part about cheap labour is that you compromise on quality and hence none of the Indian IT giants can claim to have a technologically advance projects. Have we seen any organization developing an Operating System. I guess that gives a picture of security in such jobs.

My opinion doesn’t apply to any individual, it’s a macro level perspective and I could be utterly wrong. But I still would take my chances of making a point here.

How to invest during recession

2008-10-05T09:12:00.001-07:00

THE TYPICAL INVESTOR took a bath last year, because too much of his portfolio was in stocks and his weighting was tilted too much toward tech.

If that describes you, you're probably a bit gun shy about the stock market — especially since recession predictions are proliferating faster than reality TV shows these days.

But an economic slowdown or even a full-blown recession don't necessarily mean it's time to cash in your remaining stocks and hide your money under the mattress. Instead, this should be a time to review the lessons you learned from last year's market misery and make the necessary adjustments to your long-term investment strategy.

We talked to some financial planners for their recommendations of what to do now. Here's what they had to say.

Bond Funds
Now is an especially good time to consider bonds, some planners say — perhaps for as much as 20% of assets. "There are a lot of reasons for investors to reconsider their stock-to-bond balance," says Harold Evensky, a financial planner and principal in the Coral Gables, Fla., money-management firm Evensky Brown & Katz.

Evensky recommends putting money into an investment-grade corporate bond fund rather than buying U.S. Treasurys, the gold standard of fixed-income products. Why? Even after the Federal Reserve's surprise half-point interest rate cut last week, corporate bonds remain an attractive alternative for return-hungry investors looking to avoid some of the risk associated with stocks. The current average yield on a five- to 10-year corporate bond is 6.5%, a full 1.5 percentage points above the 10-year U.S. Treasury. The returns are even greater on 20-year investment-grade corporate bonds, which currently carry an average yield of 7.48%, according to Moody's Investors Services, the bond-rating company.

Keep Business profitable during recession

2008-10-05T08:54:00.000-07:00

Dallas, TX, USA, January 28, 2008 (XTVWorld.Com) -- 1. Have a Game Plan Ready
Always be prepared. Create an alternative budget in case the economy does turn sour. Make sure to keep all your employees and vendors in the loop. If possible, host a meeting to brainstorm ideas to cut costs and increase efficiency. Also consider allowing key employees to telecommute to cut down on costs.

2. Focus on Marketing
Although the initial inclination of most companies is to first cut the marketing budget, it's not the wisest move. Instead, look for ways to use your marketing budget more wisely. You may also have to find new ways of generating old leads. In tough times, you have to do more to reach more. If before you were using just email to keep in touch, you may now have to consider following up the emails with a call. Lead generation in tough times requires more reaching out.

3. Team Up
Find another independent professional or company that offers services complementary to yours and team up. You can both cross-promote and reap the benefits. If you are a dentist, consider teaming up with a local pediatrician. If you are a law firm, think about teaming up with an accounting firm.

4. Beef up Customer Service
In tough economic conditions, your current clients become even more golden and indispensible. Make sure to keep them satisfied. Also, find a way to reward them if they send you referrals.

5. Keep your Long Term Goals in Mind
It can be tempting to cut corners for short-term gain, but remember to keep your company's long term goals in mind. All economic conditions are temporary, but that doesn't mean the same applies to your business.

USA: Recession Will Hit Workers & Poor Hardest

2008-10-05T08:50:00.000-07:00

USA: Recession Will Hit Workers & Poor Hardest

By US Socialist Appeal Editorial Board

Monday, 31 March 2008

Almost overnight, the media, corporate CEOs and government officials have gone from proclaiming that the U.S. would somehow avoid an economic slump, to all but recognizing that the country has probably already entered a recession. They are simply acknowledging what millions of workers have known for months and even years: the economy is in trouble, and working people and the poor are being hit hard.

Incredibly, we are told by some pundits that there is nothing to worry about, that it is all part of the “natural cycle” of the system, that less spending on dining and entertainment will lead to a healthier population that eats less and exercises more, that expensive gasoline leads to fewer cars on the road and therefore to less pollution, and so on. Yes, it is indeed part of the “natural cycle” of capitalism, and yes, belts will need to be tightened.

But for some, the “natural cycle” will mean a lot more pain than for others. While some CEOs may need to purchase one less corporate jet this year, millions of workers and poor people will have to choose between buying food, gasoline, heating, medicine, education and keeping a roof over their heads. Merrill Lynch has reported that by the end of 2007, 36 percent of Americans’ “disposable income” went to cover food, energy, medicine and health care, the highest proportion since records began in 1960.

The stock market has taken a beating, as investors realize that the trillions of dollars in fictitious money they have been trading back and forth has little of substance behind it. The dollar has sunk to new lows, oil and gold have risen to new highs, with both food and gasoline prices rising fast. Bear Stearns, once a top-five U.S. investment bank, collapsed in a single day, surviving only due to an emergency buyout by rival JP Morgan Chase for just $2 per share. Less than a year ago it was worth over $158 per share.

The Philadephia Fed index on manufacturing fell to -24.0 in February, from -20.9 in January, a further contraction of the sector. The reading for New York was similarly grim, registering its steepest drop on record. There is a very real danger of stagflation: rising inflation combined with rising unemployment and slow growth or contraction.

The months-long crisis in the housing market has now definitely spread to other sectors of the economy. Home prices have collapsed in many markets, and many borrowers now owe more than their houses are worth. Hundreds of thousands of households are defaulting on their mortgage loans even before the rates reset to a higher level, with twice as many defaults in 2007 than in 2006. The media has even reported cases of people resorting to arson to avoid foreclosure and bankruptcy.
To make ends meet, many workers have had to resort to “pay day” loans at exorbitant rates as high as 800 percent. The Center for Responsible Lending (CRL) recently reported that the average borrower has to pay a total of $793 for a $325 loan. Far from helping people, these predatory lenders succeed only in digging a deeper hole for workers already on the brink of financial disaster.

The loss of millions of quality unionized jobs over the last 30 years means that those with less education are more vulnerable to the effects of a recession than ever. In the past, even many people who didn’t finish high school could make a decent enough life for themselves and their families by learning a trade or working at a factory. These days, even college graduates with specialized training are more and more likely to find themselves working at a low wage, dead-end service job.

A “good job” is defined by the Center for Economic and Policy Research (CEPR) as one that provides health insurance, a retirement plan and earnings of at least $17 per hour, or about $34,000 per year. In 1979 there were 19.6 million such jobs in the manufacturing sector, the peak of U.S. manufacturing. Since then, nearly 6 million such jobs have been lost, with another 52,000 down the drain in February alone. 30 years ago, one in five high school graduates had a “good job”, by 2005 it was one in seven. According to the CEPR, in 1979, 41 percent of those who didn’t finish high school had “bad jobs”, that is, jobs without health or retirement plans paying less than $16.50 an hour. By 2005, that figure had reached 61 percent.

As the economic crisis worsens, those who lose their jobs will find it even harder to find new employment, and without savings, unable to keep up with mortgage payments, and a gutted social safety net, millions of people will be “out of luck”. Those that do find work will likely have to take major pay and benefits cuts. Many young people and even some not so young have been compelled to move back to their parents’ homes to try and regroup financially and avoid homelessness.

One sector of the economy that remains highly profitable is the so-called “defense” industry. The CEO of Lockheed Martin made nearly $25 million last year. Compare that with the average wage earned by a private in the Army: $25,000. Unable to find work or educational opportunities in the private sector, thousands of working class youth are sucked into the military in an “economic draft”.

Over 4,000 U.S. soldiers and countless Iraqis have died, and the billions of dollars spent on this tragic adventure of imperialism have meant a steady decline in U.S. workers’ standard of living. Bush’s approval rating has sunk to a new low of just 31 percent, forty points lower than it was five years ago when he launched the invasion. This is a decline similar to Lyndon Johnson’s in the late 1960s during the Vietnam War. And still the occupation of Iraq continues, a full 16 months after the Democrats were swept into congressional power with a mandate to end the war. Not one of the Republican or Democratic presidential candidates has a plan to immediately pull all the troops out.

It is in this situation that workers are being asked to vote for either Barack Obama or Hillary Clinton to bring about “change”. There is even talk of a “Dream Ticket” with both candidates on the ballot. This is more than enough proof that there are no fundamental differences between them. At root, they both defend the status quo, albeit with this or that cosmetic change. This is why working people need a party of our own. And not only for those born in the U.S., but for all workers.

On May 1st, workers across the country will march for immigrants’ rights. The magnificent mass movement that erupted two years ago has largely been driven underground by a wave of state terror, with tens of thousands being rounded up in raids and deportations. But nothing fundamental has been resolved. Sooner or later, the mass struggle will erupt again, on an even higher level, as the economic crisis forces all workers to come together to defend their common class interests. In the meantime, the scapegoating of immigrant workers for the problems caused by the system itself has increased exponentially. The labor movement must denounce these attacks and stand shoulder to shoulder with our working class brothers and sisters. Contact the WIL to join the struggle for a better world for all workers.

What to Do during recession

2008-10-05T08:45:00.000-07:00

It's time to examine your opportunities
Im afraid we boomers didnt learn our lesson. I have a friend who spent nearly $500,000 remodeling her house last year. Now her business is off by almost 70%. Another couple says all their kids college money disappeared in the tech crash, and they wonder if theyll ever be able to retire. This time weve got Gen-Xers and Gen-Yers in the soup along with us.

But lets not get grim. When everyone else is hiding under the bed, its time to examine the opportunities. Here are five things to focus on:

1. Clean up your balance sheet. Youre heading for financial trouble when you find yourself charging for necessities, shifting payment habits, using a credit card where you used to pay cash, making only minimum credit-card payments, reaching card limits and finding yourself with no cash reserves and no savings cushion.

Shop for a low-cost credit line, pay down your debt, build a cash fund and check your disability and life-insurance coverage. Sit down with your partner or family and talk about tight money and what you might do about it.

2. Think ahead. A psychiatrist friend tells me that if you are resourceful, you will emerge from this crisis ahead of the game. Thats because the recession forces you to think about everything youve done, what youre doing now and what you want for yourself and your family. It can be a valuable opportunity to review your perspectives, your options and your values -- and to rearrange your priorities.

3. Consider a career shift. In 1990, one of my high-powered Wall Street friends who loved to visit Spain asked her Spanish client for the secret to the unhurried pace and rhythm of life there. Her client responded: In the U.S., you live to work. Here we work to live. After an epiphany, my friend bailed out of her fast-track job and set up her own consulting business.

Maybe a downturn is not the best time to pick up business. But its a great time to lay plans, to think about where youd like to go from here and what you could do to recession-proof your life.

In the early 90s, my husband and I were in Manhattan with two young kids in private schools and a monthly maintenance and mortgage payment that would knock your socks off. We vowed that when we got the opportunity, we would find a way to cut expenses and live more simply.

4. Remember that everything is cyclical. In 1991, when Bostons high-tech corridor was hit by recession and the unemployed could neither find work nor sell their homes because of the real-estate slump, the economy in Houston was picking up steam. A recent story in the New York Times showed that while Augusta, Ga., lost 5,000 jobs in the last year, nearby Savannah gained 3,400.

Look around. Its always a good time to invest in some training, take some classes or think about your ideal location. My husband, who is a journalist and consultant, recently completed the two-year course to get the Certified Financial Planner designation. We should always be creating more options for ourselves.

5. Develop a skills portfolio to go. During the last recession, I interviewed Charles Handy, a management expert and author who taught at the London Business School. In his book, The Age of Unreason, he argued that the structure of the workplace was changing dramatically. I hope you wont look for a job, he advised his own children when they graduated from college. Look for customers. If you have saleable skills, you can always work.

Handy, who began his career as an oil executive, divided workers of the future into three groups: managers and technicians who run the companies; unskilled clerks and laborers; and creative people and designers who work on a contract basis for the company. I think the third category should be your goal. Most of us will be working longer; it would be nice to be doing something we enjoy.

Handy offered a tip for those who wanted to reinvent themselves: Go to 20 people you know and ask each to tell you one thing you do very well. An unemployed advertising executive tried it and was told that he was very creative, good at organizing teams, presenting ideas, leading people, selecting wines and recalling historical details. This guy set up a business taking people on tours of battlefields and other historical sights and vineyards in Europe.

It wont do to ignore the reality of a slumping economy. In this environment, you can get ahead by re-examining your life and making smarter choices. As Fritz Mondale told his hastily organized campaign workers after they lost their six-day senate race in Minnesota: Often in life, you learn more from the defeats than from the victories.

What is Recession?

2008-09-30T10:00:00.001-07:00

A recession is a contraction phase of the business cycle. The U.S. based National Bureau of Economic Research (NBER) defines a recession more broadly as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."[1] A sustained recession may become a depression.

Newspapers often quote the rule of thumb that a recession occurs when real gross domestic product (GDP) growth is negative for two or more consecutive quarters.

Attributes of recessions

2008-09-30T09:59:00.003-07:00

A recession has many attributes that can occur simultaneouly and can include declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions are the result of falling demand and may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A severe or long recession is referred to as an economic depression. Although the distinction between a recession and a depression is not clearly defined, it is often said that a decline in GDP of more than 10% constitutes a depression.[3] A devastating breakdown of an economy (essentially, a severe depression, or hyperinflation, depending on the circumstances) is called economic collapse.

Predictors of a recession

2008-09-30T09:59:00.001-07:00

There are no completely reliable predictors. These are regarded to be possible predictors.[4]
Stock market drops have preceded the beginning of recessions. However about half of the drops of 10% or more since 1946 have not been followed by recessions.[5] Also, approximately half of the stock market decline came after the beginning of recessions.
Inverted yield curve,[6] the model developed by Fed economist Jonathan Wright, uses yields on 10-year and three-month Treasury securities as well as the Fed's overnight funds rate. Another model developed by Federal Reserve Bank of New York economists uses only the 10-year/three-month spread. It is, however, not a definite indicator;[7] it is sometimes followed by a recession 6 to 18 months later.
The three-month change in the unemployment rate and initial jobless claims.[8]
Index of Leading (Economic) Indicators (includes some of the above indicators).[9]

Responding to a recession

2008-09-30T09:46:00.002-07:00

Strategies for moving an economy out of a recession vary depending on which economic school the policymakers follow. While Keynesian economists may advocate deficit spending by the government to spark economic growth, supply-side economists may suggest tax cuts to promote business capital investment. Laissez-faire economists may simply recommend the government remain "hands off" and not interfere with natural market forces. Populist economists may suggest that benefits for consumers, in the form of subsidies or lower-bracket tax reductions are more effective, and serve a double purpose including relieving the suffering caused by a recession.[citation needed]

Both government and business have responses to recessions. In the Philadelphia Business Journal, Strategic Business adviser Carter Schelling has discussed precautions businesses take to prepare for looming recession, likening it to fire drill. First, he suggests that business owners gauge customers' ability to resist recession and redesign customer offerings accordingly. He goes on to suggest they use lean principles, replace unhappy workers with those more motivated, eager and highly competitive. Also over-communicate. "Companies," he says, "get better at what they do during bad times." He calls his program the "Recession Drill." [10]

Central bank response

2008-09-30T09:46:00.001-07:00

Usually, central banks respond to recessions by easing monetary conditions, e.g. lowering interest rates. In the United States, the Federal Reserve has responded to potential slow downs by lowering the target Federal funds rate during recessions and other periods of lower growth. In fact, the Federal Reserve's lowering has even predated recent recessions[11]. The charts below show the impact on the S&P500 and short and long term interest rates.
July 13, 1990-September 4, 1992: 8.00% to 3.00% (Includes 1990-1991 recession) [12] [13]
February 1, 1995-November 17, 1998: 6.00 - 4.75 [14] [15] [16]
May 16, 2000-June 25, 2003: 6.50- 1.00 (Includes 2001 recession) [17] [18] [19]
June 29, 2006- (Mar. 18 2008): 5.25-2.25 [20]

Siegel[21] points out that cuts in the Federal funds rate are now widely anticipated; thus, cuts are no longer followed by a longer-term rise in stock market indexes.

The declining frequency of recessions in the past two decades and the reduction in declines in GDP suggest that the Federal Reserve has been successful in moderating contractions. However some critics argue that reducing the Federal funds rate has had the effect of adding too much liquidity to the financial markets and excess debt accumulation by consumers. Empirical research by the staff of European Central Bank showed a correlation between excessive money growth and the depth of post-boom recessions.[

Stock market and recessions

2008-09-30T09:45:00.001-07:00

Some recessions have been anticipated by stock market declines. In Stocks for the Long Run, Siegel mentions that since 1948, ten recessions were preceded by a stock market decline, by a lead time of 0 to 13 months (average 5.7 months). It should be noted that ten stock market declines of greater than 10% in the DJIA were not followed by a recession[23].

The real-estate market also usually weakens before a recession[24]. However real-estate declines can last much longer than recessions.

Since the business cycle is very hard to predict, Siegel argues that it is not possible to take advantage of economic cycles for timing investments. Even the National Bureau of Economic Research (NBER) takes a few months to determine if a peak or trough has occurred in the US[25].

During an economic decline, high yield stocks such as financial services, pharmaceuticals, and tobacco tend to hold up better[26]. However when the economy starts to recover and the bottom of the market has passed (sometimes identified on charts as a MACD [27]), growth stocks tend to recover faster. There is significant disagreement about how health care and utilities tend to recover[28]. Diversifying one's portfolio into international stocks may provide some safety; however, economies that are closely correlated with that of the U.S.A. may also be affected by a recession in the U.S.A.[29].

Recession and politics

2008-09-30T09:44:00.000-07:00

Generally an administration gets credit or blame for the state of economy during its time.[30] This has caused disagreements about when a recession actually started.[31] In an economic cycle, a downturn can be considered a consequence of an expansion reaching an unsustainable state, and is corrected by a brief decline. Thus it is not easy to isolate the causes of specific phases of the cycle.

The 1981 recession is thought to have been caused by the tight-money policy adopted by Paul Volcker, chairman of the Federal Reserve Board, before Ronald Reagan took office. Reagan supported that policy. Economist Walter Heller, chairman of the Council of Economic Advisers in the 1960s, said that "I call it a Reagan-Volcker-Carter recession.[32] The resulting taming of inflation, did, however, set the stage for a robust growth period during Reagan's administration.

It is generally assumed that government activity has some influence over the presence or degree of a recession. Economists usually teach that to some degree recession is unavoidable, and its causes are not well understood. Consequently, modern government administrations attempt to take steps, also not agreed upon, to soften a recession. They are often unsuccessful, at least at preventing a recession, and it is difficult to establish whether or not they actually made it less severe or long lasting.[citation needed]

Understanding of the word "recession" differs between economists, newspapers, and the general public. Generally speaking, a recession is present when graphs are sloping down in respect to production and employment. Consequently, a politician can truthfully say "the recession is over," even though little has improved. This may imply to the public that the economy is in recovery, suggesting the graphs are sloping upward, though there may actually exist a period of stagnation, when numbers remain low even though they are no longer dropping.[citation needed]