Starbucks (NASDAQ: SBUX) and Lehman Brothers (NYSE: LEH) do not have much in common.That changed a bit yesterday when word came out that they would both cut workers. It is a demonstration of how difficult things are getting in the economy. A coffee chain and investment bank, both hit by the need to "downsize".
The Fed recently said that unemployment in the US should run 4.8% to 4.9% during 2008. That is not significantly changed from where the number is now.
The Fed’s number may well be wrong. Ford (NYSE: F) and GM (NYSE: GM) are currently buying out thousands of workers. At some point soon many of those people will be considered unemployed. Wall St. firms are likely to cut a large number of expensive workers because underwriting and M&A activity is dropping.
The housing industry and mortgage companies are going to have to cut tens of thousand more people. Airline mergers in the offing, like the one between Northwest (NYSE: NWA) and Delta (NYSE: DAL) will be based on the ability of the new, larger carrier to squeeze out costs. In the airline industry, that means firing people.
When Starbucks and Lehman are both taking people off the payroll it is a telling sign. A tough economy is taking its toll across a very wide specturm of industries.
Douglas A. McIntyre