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Wednesday, 31 December 2008

Personal lessons from 2008

This year has been one where the word "unprecedented" has been banded about more than I care to remember. Indeed, in recent history this year has been unprecedented, however, over the course of human history or even the last century I think things have been overblown. Commentators and press columnists have both a very short memory and a desire to exaggerate. Yes things are bad, but they have been bad before and we have got through them.

But lessons can and should be learnt from the turmoil of 2008. I'm not talking about lessons for the government or financial system. Clearly there are plenty of lessons to be learnt here and things will have to change. But there are also personal lessons in the way we conduct our lives and see the world.

Here are a few that I'll be taking away with me:

- Pay little notice of forecasts made for more than a year. The difference between the forecasts made at the end of 2007 and the out turn from 2008 has been so large that forecasting the economy has lost a lot of meaning. I find it more useful to concentrate upon the current state of economies and the general outlook over the future.

- Laugh in the face of anyone who tells you that something is obvious or a dead cert. So many people I have talked to over the last couple of years have banged on about the property market and how it was easy to make money. With the market likely to fall around 30% from peak to trough many are now struggling having fallen into negative equity and overextended themselves on their mortgage. Never trust anyone that says "You'll always make money", its either a scam or a sure sign that the market is overheated.

- Plan more for the future. In the recent boom years it has been easy to live for the moment. Saving nothing and forgetting the grand plan. It has been easy to move up the career ladder and simple to get pay increases. However, it should be remembered that the economy is fragile and can turn very quickly. You'll need a Plan B when this happens.

- Hard work and education pays off. The boom times were easy for many people to get by doing the minimum at work. It often seemed to some that a little bit of a loud mouth and a sociable nature would get you further than hard work. Looking at my friends who have lost their jobs and those that are still in work, I would suggest that when things get tough those people who haven't worked hard and don't have their qualifications will be the first to be identified for the chop.

- You can still change jobs in a recession. Although companies are making many people redundant there continues to be churn within the economy as people move company and people retire. Therefore you should not see recession as a time where you have to stay at your current job. You can still climb the ladder even in the bad times...its riskier but higher risks tend to come with higher rewards.

- As bad as it will get better.

It has been a long hard year but there has been plenty of lessons for everyone. These are lessons for life, that will make you a better person and employee throughout the next lot of boom and the bust.

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Tuesday, 30 December 2008

Job security and earnings saps confidence

Consumer confidence in the US fell to a record low in the US in December signalling that the economy has a long way to go before the economy starts to improve. Historically an upswing in consumer confidence has lead general economic revival by about twelve months.

Even though retailers are slashing prices and oil prices have fallen by over 70% from their peak, consumers are becoming increasingly worried about the outlook for their jobs and incomes.

According to the Conference Board, respondents saying jobs were "hard to get" was 42% in December - up by five percentage points from November, whilst those claiming jobs were "plentiful" dropped to 6.2% from 8.7%.

The level of consumers expecting increased incomes fell to 12.7% in December down from 13.1% in November.

Economic realities have started to bite, forcing consumers to accept the realities that although prices are falling, without a job or with falling incomes lower prices will make little difference.

An upswing in the US economy will lead the upswing in the world economy, it seems like this is still some way off.

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Fairer, more balanced economy

Yesterday the Chartered Institute of Personnel and Development forecast that 600,000 jobs could be lost in the UK next year. This made plenty of headlines but isn't the worst forecast out there at the moment as a number of forecasting houses have already suggested that job losses could be closer to one million.

Once again these forecasts are pure speculation. Given that the economic downturn in 2009 is unlikely to be similar to anything that has occurred in the past twenty years, basing these predictions upon previous economic cycles is likely to be erroneous.

Nevertheless, whether this forecast is too low or too high, the one thing that is clear is that jobs will be lost in their hundreds of thousands over the next twelve months. Even with the errors associated with forecasting, this can be quite safely assumed.

Brendan Barber, head of the TUC, has acknowledged that 2009 is going to be a very tough year. He has taken a highly sensible approach to the recession, blaming the financial sector for the mess that we're in (probably a little over simplistic) but also stating that the government should continue to support banks and the financial system.

It is good to see the trade unions acknowledging the extent of the problems and taking a proactive stance for the benefit of the nation. Often trade unions have tended to think about their members first and the national economy second. With the whole nation in now entering recession they have put differences aside in the hope of making the recession as shallow and as short as possible.

If the trade unions can accept that many of the their members will face redundancy and / or pay cuts over the coming twelve months then they will be a key part in making this recession less painful.

Brendan Barber also called upon the government to make the economy more "fair and balanced". The word "fair" is rather loaded and means different things to different people. In the eyes of the trade unions I would imagine this would mean higher taxes on the wealthy. Although this wasn't stated by Barber I this seems to be the natural conclusion from the statement. However in a world of global competition this would be a poor idea. If by fairness he means an increase in social mobility, and an improvement in meritocracy then this is something many would approve of, something that would increase economic efficiency without the necessity to increase taxes and penalise success.

The argument for a more balanced economy is not that valid. It is true that the economy does have a large number of jobs in the financial sector, that account for a large amount of the nations wealth. Nevertheless, looking at the census figures, the majority of people are not working in financial services. Manufacturing continues to employ people in the millions and plenty of people work in construction, retail, government services etc.

Also the UK has a specialism in financial services. A combination of geographic location, established institutions and a stable political and economic environment has made London (and to a lesser extent Edinburgh) places of global financial dominance. As a result these centres can conduct specialised business demanded by the rest of the world, and as a result these businesses can command high fees. The UK does not have the infrastructure or skills base to be a major specialist in manufacturing.

A free and open economy has chosen to make London a global financial centre, and for UK manufacturing to shrink to smaller, more niche businesses. If the government attempts to artificially balance the economy it will lead to an inefficient distribution of capital and labour. The economy will be worse off as a result.

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Sunday, 28 December 2008

Pay cut or job loss

The British Chamber of Commerce has asked the UK government to keep the national minimum wage on hold in 2009 to help businesses to cope with the current economic downturn.

Whether the government keeps the minimum wage on hold or not will not stop wages in the private sector remaining on hold or falling in 2009.

Some businesses, particularly those in the financial sector, have already started to cut wages. In this sector salary cuts of between ten and twenty per cent throughout the company won't be too unusual.

But pay freezes and pay cuts of a smaller magnitude should be expected across all sectors apart from the public sector. Given that those in work receiving the pay cuts will be paying for these public sector pay rises, there may be increased calls for the public sector to also cut back on staff or salaries.

A pay cut may seem like a terrible burden and terribly unfair. Nevertheless, this should be seen as a good thing. In previous years when unions were stronger and labour markets less flexible a pay cut would have been unheard of. As a result some companies were either forced to cut jobs or go out of business.

The ability to cut wages instead of cutting jobs will help to keep businesses going and people in work. These people will be able to retain and grow their skills whilst at work instead of stagnating. Businesses will not have to face the costly burden of redundancy and rehiring and they will have the available staff to take advantage of opportunities that arise. The government will have less unemployment benefits to pay.

A flexible labour market is one of the greatest assets that the UK and US economies have and will be one of the things that will help to pull the economy out of recession and see higher growth over the long term.

It is best to look at this way...what would you rather a twenty per cent pay cut or no job at all?

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Worst performance in a job interview

I read this in the Independent on Sunday and thought I would share it, as it is a fantastic example of a poor job interview technique.

"...the man who, receiving a mobile phone call, asked the interviewer to leave because it was a "private call"; the man who told the interviewer he had been sacked from his last post for beating up the boss; the candidate who sniffed his armpits as he walked into the interview room; and the person going for an accountancy job who told the interviewer: "I'm a people person, not a numbers person." But the winner is the American who, during a telephone job interview, flushed the toilet."

Try not to make these mistakes in the New Year...but if you do we'd be happy to hear about them.

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Christmas shopping and the future of retail jobs

If you work in retail at the moment then you should be concerned about your job. Even though some stores are recording brisk trading in London and New York, it is unlikely to be enough to save a number of retailers. Without credit insurance and shoppers being increasingly selective in how much and where they spend, those shops already on the wane are likely to come unstuck.

As a result a number of stores have already announced that they are already in trouble and could be closing their doors in the next few months.

Today Adams a childrens' clothing retailer announced that they have been taking into administration, thretening 2,000 jobs worldwide.

There will be more to come in the new year. Expect the collapse of retailers to accelerate in the coming 30 days.

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What to wear at an IT interview

According to a recent survey conducted by Robert Half Technology, when CIOs were asked, “What is the most appropriate interview attire for someone interviewing for an IT job with your company? ” Their responses:

Formal business suit - 35%
Khakis and a collared shirt - 26%
Tailored separates (e.g., skirt and blouse, jacket and dress pants) - 24%
Jeans and a polo shirt - 9%
Other - 1%
None in particular - 2%
Don’t know/no answer - 3%

This shows that even in those industries where work dress is a little more relaxed you are probably better off going for the smarter option when going for interview. With a greater than a third chance that you will be underdressed if you don't go in a formal suit it is not worth taking the risk and turning up in a pair of jeans!

The survey was developed by Robert Half Technology, a leading provider of information technology professionals on a project and full-time basis, and conducted by an independent research firm. It was based on telephone interviews with more than 1,400 CIOs from companies across the United States with 100 or more employees.

“Employers want to see that job candidates have made the effort to dress appropriately for the work environment,” said Katherine Spencer Lee, executive director of Robert Half Technology. “While a suit isn’t the best choice for every interview, it’s better to err on the side of overdressing versus appearing too casual.”

Lee added that, when in doubt, candidates should consult an insider who works at the company to get advice on the employer’s work style and preferred interview attire. “If you’re working with a recruiter or an HR representative, he or she can advise you on how to dress appropriately.”

Robert Half Technology offers additional tips for selecting proper interview attire:
Choose something comfortable. You want to look as relaxed as possible, so avoid uncomfortable clothing. If you buy something new, wear it a few times before your meeting to make sure it fits well and you feel confident in it.

Pay attention to details. Don’t overlook the less visible -- but no less important -- aspects of your appearance, like your shoes, socks and accessories. Make sure your outfit is free of wrinkles and stains, your hair and nails are well-groomed, and your shoes are polished.

Don’t overdo it. Ultimately, you want your experience and skills to be the focus of the interview -- not your outfit. Avoid any distracting clothing, big jewelry, or excessive perfume, cologne or makeup. Also, remember to turn off any electronic “accessories,” such as a cell phone or BlackBerry, before the meeting.

About the Survey

The national survey was developed by Robert Half Technology, a leading provider of information technology professionals on a project and full-time basis, and conducted by an independent research firm. The survey is based on more than 1,400 telephone interviews with CIOs from a random sample of U.S. companies with 100 or more employees. In order for the survey to be statistically representative and ensure that companies from all segments were represented, the sample was stratified by geographic region, industry and number of employees. The results were then weighted to reflect the proper proportions of the number of employees within each region.

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Greedy economic forecasting

I was enjoying the Christmas television yesterday when the news came on the TV. It showed thousands of people rushing into Selfridges on Oxford Street to get the very best sales items they could. Then came the grim news that despite all this it wouldn't be enough to save the economy...according to some economics forecasting house.

This economics forecasting house had released their revised forecasts to coincide with Christmas and the boxing day sales. They were some of the most bearish forecasts around, helping to paint a very bleak and miserable picture at this happy time of year.

What amazes me is how easily these economic forecasting houses abuse the media so freely. This was clearly a bad news story timed for release to coincide over Christmas when a) there is little other news and b) people are thinking about shopping and retail performance.

Worst of all these forecasts are likely to be no better than what the average man on the street could come up with. In these times of uncertainty these economic forecasting houses have so little idea about where the economy is going that any forecasts made beyond next week are pointless.

The independent forecasters tend to have teams of about 10 people. Many of them will be newly out of university and not working specifically on macroeconomics. Most of the forecasts will have been dreamt up to be both headline grabbing but also near enough to the general consensus of the time. As a result we get these slow creep as forecasts are constantly revised each week.

Don't get me wrong forecasting is very difficult at the moment but when these forecasting houses use the media so brazenly to build up their brand they are playing with the economic sentiment in a dangerous and damaging fashion.

I would ask economics journalists to think twice before they mindlessly publish the next round of forecasts they get. Have a look back just a month ago to what the previously forecasts were, they are likely to be so way off that this round of forecasts won't be much better.

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Thursday, 18 December 2008

The end of Woolworths, store closures and job losses

So it has been decided, all Woolworths stores will be gone from UK high streets by 5 January, resulting in the closure of 807 stores and the loss of around 27,000 jobs.

Some will find work in the stores that take the place of Woolworths on the high street but many of the stores will sit empty for much of 2009 as the economy slips deeper into recession.

If you are one of the people that has been effected by the collapse of Woolworths it is definitely a good idea to have things prepared should another store take the place of Woolworths. They will need staff but there will be many more people looking to take these jobs.

Have your CV written and ready should this eventuality arise. Check out this guide for writing a winning CV.

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Tuesday, 16 December 2008

Fed interest rates to near zero

It is good to see the Fed taking the bull by the horns...or should that be the bear by something?

They have cut interest rates to a range of between zero and 0.25% today. This cut recognises the magnitude of the problems that the US and the global economy is in.

As a student of the Great Depression Ben Bernanke has taken proactive steps to try and curb the US economic downwards spiral.

This cut will not be enough to get the economy out of the hole but it will go some way to helping in the long run. Don't expect instant results from this cut. The banks, in their current state, will take a while to pass on the cut to consumers and to start to lend again to business.

Expect 2009 to be a long and painful year, but for some, particularly those on fixed incomes, falling prices and lower interest rate cuts could come as a pleasant boost.

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US interest rate cut

It seems highly likely that the US Federal Reserve will cut interest rates in half today to 0.5%.

As base rates approach zero the Fed is rapidly running out of conventional measures to stimulate the economy. Therefore expect to see some forms of quantitative easing and large fiscal stimuli throughout 2009.

For more information on quantitative easing

Managing the US economy is going to be extremely difficult over the coming six months. Without a well functioning financial system, few of the conventional measures are helping to get the economy going again.

The Fed and the US Treasury will have to work together first and foremost in getting to the route of the US economic downturn. Whether this be housing, the banking and financial system, consumer confidence etc etc. Large scale, throw your money at it type solutions are not going to work well...they will be costly and wasteful.

If the broken system can be fixed and the economy taught to stand on its own two feet, then the seeds will be sewn for economic recovery.

Its going to be a long, hard and complicated journey.

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Friday, 12 December 2008

Santander to cut 1,900 UK jobs

Having saved a number of UK banks and building societies from the brink of collapse, it is now only reasonable that Santander consolidate their enlarged business but removing those jobs that have either become over staffed or unnecessary following their acquisition of Abbey, the Alliance & Leicester and Bradford & Bingley.

Today they announced 1,900 job cuts in the UK as they seek to consolidate their business activities.

This highlights the fact that even if a business is saved from failure, it is unlikely that all staff will be kept on. Nevertheless, had Santander not stepped in in the first place it seems inevitable that many more jobs would have been lost. It is time to be thankful for small graces in these turbulent times.

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Thursday, 11 December 2008

Bank of America job cuts

Even though I said it isn't just banks and financial institutions that are cutting jobs, this sector continues to announce massive redundancies worldwide.

Today we learn of another big bank that is planning on making major headcount reductions. The Bank of America has said that they will cut 30,000 jobs, or 11% of their workforce over the next three years.

Given that this follows their purchase of Merrill Lynch it seems that most of these job cuts will occur in the US, but other centres such as London and Frankfurt are likely to suffer.

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Wednesday, 10 December 2008

Sony job cuts

Sony have shown once again that the current economic downturn and job cuts are not limited to the banking and financial sectors.

Sony have announced that 16,000 jobs will be cut from their worldwide operations, a significant number of these will be in Asia.

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Monday, 8 December 2008

Light at the end of the tunnel?

It has been a couple of months since the Lehman Brothers and the subsequent fall out. Over the last few months it seems that things in the financial markets have stabilised and because of global government actions we shouldn't see too many more major financial institutions collapsing. I'm sure some firms will get into trouble but for now I don't think another Lehman's will happen - particularly as Citi was rescued.

Sadly the downturn in the wider economy is still in full force and likely to get worse before it gets better. Nevertheless, with interest rate cuts, falling prices, government fiscal stimuli and the early indications of stability in the financial markets could we be reaching a bottom?

Well it seems possible that we might be reaching the bottom in financial markets. Equity prices seem to be very undervalued and presenting great opportunities to those with capital to invest.

Sadly the real economy lags the stock market and will continue to weaken over the next six months before reaching anything like a bottom. In countries like the UK the bottom is likely to take much longer.

As the real economy falters this will have a negative impact upon financial markets once more, limiting the extent of the rebound, and keeping us bouncing along the bottom for some time yet.

Being full of seasonal joy I am optimistic that this is the light at the end of the tunnel that we've all been looking for...I just hope that that light isn't a train coming in the opposite direction.

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