TWO BIG LAYOFFS AND A HORROR STORY

January 27, 2010

By Al Doyle

Where are those government-touted "green shoots" that are supposedly appearing in the economy? In the past two days, Sam's Club (Wal-Mart's warehouse membership division) announced layoffs of approximately 11,000 in-store and home office employees, and that was followed almost immediately by Verizon's plan to slash 10,000 employees.

MIA has long (and correctly) predicted the demise of businesses that rely on selling luxuries and items bought on discretionary income and debt, but the recent wave of Sam's layoffs is an entirely different matter. The business model leans heavily towards selling groceries and other basics at competitive prices. This is hardly the stuff of decadence.

Some retail analysts point to intense competition from rival warehouse club Costco as one factor behind the layoffs at Sam's. MIA has no argument with that line of thinking, but there are bigger problems in the overall economy that have severely hurt Sam's and other merchants who specialize in high-volume sales.

For many families, it wasn't worth the $35 to $100 annual membership fee to shop at Sam's Club, but small businesses and sole proprietorships jumped at the opportunity to buy cheaply in quantity. Many of those former members have shut their doors, while others are spending much less. Even relatively lean businesses such as Sam's can't avoid the effects of what is shaping up to be Great Depression II.

While the Sam's and Verizon layoffs were widely publicized, it's the lesser-known job losses that tell a more precise story of what is taking place in America today. The recent layoff of half the IT staff of a large consumer products corporation is one of those "you can't make this stuff up" experiences.

As one of the survivors of the purge reports, "They told us all to not go anywhere and sit and wait at our desks for a couple of hours because they were laying off a bunch of people. You can imagine how nervous everyone was, waiting to see if they were going to be unemployed.

"Then management started calling people in to tell them they were being laid off. They plan to replace the people that are being fired with Indians on H-1 visas. I know they'll be paying the Indians way less. The people who were let go were told they had to stay to train their replacements. If they didn't, they were told they would lose their severance and unemployment benefits.

"Another manager went around to the rest of us saying 'Don't worry, they are all talented people. They'll get good jobs.' One of my co-workers whispered 'The people they laid off a year ago are still unemployed.'"