Cisco’s announcement to cut 1,800 jobs in addition to Air France’s 5000 jobs and Citroen’s 8,000 jobs just indicate that the job cuts in manufacturing sector is far from over. While there seems to be a little talking up of the economy and the unemployment numbers have been reducing, what has not is the spate of announcements from big manufacturers. The difference this time is that the unemployment figures are coming from big manufacturers as against small and medium enterprises which used to be the maximum chunk a few months ago.
The bad news about the downgrading of Germany’s AAA credit rating does not help. The inherent threats of Greece defaulting, Spain seeking more debt support and Italy waiting round the corner are all not helpful at all.
In my view, markets are driven by sentiments and generally irrational. The elections in the US in November this year means that the Government there will do everything they can to get the numbers up and the talk the markets up. If USA recovers, most of the western world will follow suit and one can only hope that all the positive news we have heard so far in the last few weeks and the fact that USA will be doing more than the ordinary will all help us with our economic recovery.
In the UK, while the Olympics has not had the effect like in Beijing or Athens on small and medium sized businesses due to the brand protection provided to the main sponsors of the event, the employment opportunities that the Olympics has provided cannot be undermined. The construction output has definitely the economy in terms of GDP numbers as without the construction numbers, the GDP would have been far more negative than what it actually is currently.
The state of economy has a direct influence on what people do in terms of their risk management. Though I have read in several management books and have seen in other markets, the fact that we are in a recession now makes the impact even more noticeable. The number of people enquiring for Accident & Sickness insurance is now more than the people enquiring for Unemployment Insurance. While we should not ignore the fact that Olympics and the term holidays do have their effect on the behaviour of people and what they buy, for considered purchases of products like Unemployment Insurance, there is usually a much more profound reason.
Has the market changed for good? – Only time can tell….