digibyte: HP splits - but what is the economic impact of the job cuts?

Jon Reed Profile picture for user jreed September 16, 2015

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When the news of HP's anticipated enterprise split hit, it came with a kicker: as many as 30,000 layoffs to come on the HP Enterprise side after the split. This layoff constitutes approximately 10 percent of HP's 300,000-person workforce,

HP is hardly alone in its layoff news. IBM was busy with layoffs in 2014, to the tune of a 12 percent headcount reduction (though IBM reported that most of those "layoffs" were business unit sales, so those folks didn't necessarily lose their jobs). IBM also spent $1.5 billion in 2014 on that delightful project known as "workforce rebalancing."

And that's the nature of these employment shifts. Each situation is rarely as cut-and-dried as the headlines imply. As re/code reported, HP Enterprise will staff up again, but via lower-cost global labor:

Most of the cuts will occur in HP’s long-troubled Enterprise Services unit and may be offset by new hires in that unit. The head of the group, Mike Nefkens, outlined a plan under which it is cutting jobs in what he called “high-cost countries” and moving them to low-cost countries. He said that by the end of HP Enterprise’s fiscal year 2018, only 40 percent of the group’s workforce will be located in high-cost countries. “We will be delivering our services from fewer sites” and in countries where labor costs are lower, he said. The plan will save about $2 billion per year, he said.

That got me thinking: how do we reconcile layoff news with the relatively good unemployment numbers released by the Obama administration? Will jobs be a big factor in the next presidential election?

It's not hard to paint a grim employment picture:

So what about these upbeat job numbers? A balanced piece on the demos.com site shows that unemployment numbers are all about how you slice and dice it. Donald Trump, for example, recently blasted the Obama administration for what he called a "real unemployment rate of 42 percent."

Contrast Trump's view with the much more optimistic report from the U.S. Labor Department, which puts the U.S. unemployment rate at 5.1 percent - the lowest rate since 2008. Back to demos.com, which defines a series of unemployment rates.

The strictest and most optimistic is called U3 - that' the 5.1 percent number of active job seekers who can't find work. But the U6 rate, defined as Unemployed + Marginally Attached + Involuntarily Part-Time, is not such a happy picture. That comes in at 10.8 percent, including those of working age who have given up finding work entirely).  If accurate, that 10.7 percent number compares with a similar number for European unemployment.

Just how much these numbers will factor into upcoming elections remains to be seen. One Gallup poll shows that concerns about the economy in the U.S. are significantly less than their peak in 2008. In the U.K, the rise of UK Labour Party Socialist Jeremy Corbyn is another story to watch.

I don't have the answers and don't expect to have them anytime soon. But if I had to pick an event that defines the job outlook of most folks I know, it wouldn't be the exciting inventions of the Ubers. It would be the uncertainty of mass layoffs and the freelance economy beyond it. That sparks a conversation which can go in two directions: political debate or career re-invention. Both matter.

Image credit: unemployment © Suchota - Fotolia.com

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