Monday, June 16, 2008

In Come the Waves: Sacramento Bee to Cut Workforce by 8.1%

From the Sacramento Bee:

The McClatchy Co., battered by declining profits and revenue, announced a 10 percent companywide cut in its work force Monday, including the Sacramento publisher's first-ever across-the-board layoffs. The decision will eliminate 1,400 jobs through a combination of layoffs, voluntary departures and attrition. The Bee, McClatchy's largest paper, announced it will eliminate 86 jobs, 46 by layoffs. The reduction will trim the paper's workforce by 8.1 percent...McClatchy is the largest public company in Sacramento and the third-largest newspaper chain in the country.
...
The economic downturn has been another big blow to publishers, particularly McClatchy. The company gets a third of its revenue from California and Florida, two of the states hit hardest by the crash in the housing market. For instance, The Bee's revenue fell 16.9 percent last year, or about twice as much as the company as a whole, according to Securities and Exchange Commission filings.
From the Sacramento Bee:
On the street level in Sacramento, where unemployment is 6.1 percent, it feels as though hard times are already here. "My sense is that we're in really big trouble," said Alice Strombom, a Sacramento attorney who was pumping gas at $4.64 a gallon the other day at a 76 station on Freeport Boulevard. "I don't have that normal sense that everything's going to be fine." She recently traded her Audi for a Toyota Corolla with much better gas mileage.
...
Two Sacramento dealerships have announced shutdowns in recent months, Paul Blanco Chevrolet and Great Valley Chrysler-Jeep-Mazda-Isuzu. Senator Ford stopped selling new cars.

The slowdown has affected general retailers. Arden Fair's traffic counts are lower than a year ago, while sales volumes are flat. Clothing stores seem to be getting hit hardest, said property manager Tod Strain. "We are feeling it, no doubt about it," Strain said.
From the Appeal Democrat:
Every day Steve Nickless and his crew load up a trailer with mowers and weed trimmers and get to work on lawns. The homes they visit, though, are unoccupied. Nickless, as an employee of BV Home Services, is hired to maintain hundreds of abandoned and foreclosed homes in the Central Valley.
...
The hundreds of vacant properties and the lack of upkeep on those homes caused Yuba County to address the issue through code enforcement...Finding responsible parties, though, may not be easy. "It's going to be difficult," Strang said. "This is a new type of violation we haven't seen before. We've had vacant homes before but not to this level."

40 comments:

luca said...

The fact that the sac bee is laying off employees has no correlation with what is going on in real estate in sacramento. Workforces are being cut nationally and also world wide
Why? Because only 8% of people 25 and under read them- while 80% get their news online for free between yahoo and google.

While this is an interesting trend it is simply just a macroeconomic phenomenon that will hit even worse worldwide as the aging population who grew up with newspapers die or until they learn how to use computers themselves.

I do realize that it does suck financially for those who are unexpectedly getting a pink slip and I hope their are better jobs for them around the corner.

Patient Renter said...

The fact that the sac bee is laying off employees has no correlation with what is going on in real estate in sacramento.

Where do you think the Bee's income comes from? (hint: RE ads)

Sympathies to all the laid off Bee staff.

80% get their news online for free between yahoo and google

The interesting thing about yahoo and google is that their news is largely syndicated content from actual real newspaper publishers, including members of the AP. You close all the newspapers and much online news goes with it.

Bakersfield Bubble said...

Two Sacramento dealerships have announced shutdowns in recent months, Paul Blanco Chevrolet and Great Valley Chrysler-Jeep-Mazda-Isuzu. Senator Ford stopped selling new cars.

_____________________________


Look for more of this. I think close 25 car dealerships have closed in Ca already in the last year.

STOP ROSEVILLE CRIME said...

The company (Sac Bee) gets a third of its revenue from California and Florida, two of the states hit hardest by the crash in the housing market.

Interesting since the whole way down the Bee was saying housing was on its way back up. I guess they are finally telling the truth after all those lies. Are they offering any apologies for those lies?

Deflationary Jane said...

BTW for everyone who says we're at the bottom because of inventory, please take a look at the Countrywide foreclosure blog. Pay especial attention to the chart >; )

Housing tracker says we're flat inventory with yet more reductions. I think it's the calm before the next storm.

James said...

"I think it's the calm before the next storm."

Yes, there is one more big push to come. The banks are giving up and the green light is on to buy your neighbor's house in foreclosure then walk away from your own home.

This will the last big bit of capitulation before a bottom forms.

luca said...

Deflationary Jane- I agree the housing inventory seems to show the calm before the next storm of foreclosures. I was on www.foreclosureradar.com last night and There has been a huge spike in pre-foreclosures all over Sacramento - even in the more desirable areas!

Alt-A- is just now starting to show its ugly face- http://www.youtube.com/watch?v=pmeBSWI9sF8

There are so many alt-A loans in the valley. Subprime was the sucker punch- Alt-A is the knockout blow.

I just put in a bid for $200k on a Carmichael home that sold for $550k in 05' They told me to raise the price $25k and it could be mine!!
The decent areas are in big trouble guys!

Diggin Deeper said...

I guess that's what recession is all about, cleaning out the excess, preparing for better times. The problem with this one is that we don't have a manufacturing base to launch from once we do claw our way out of this. During the deep inflatrionary recession of the 70's we still built "stuff" that we could consume internally and sell abroad. Today we basically produce brain cells and high priced services, all of which can be done for less overseas.

Maybe we'll get our act together and start building factories again to service our own population...Then again........

James said...

Manufacturing in the U.S. generates about $1.6 trillion, or 12 percent of our gross domestic product, accounting for nearly three quarters of the nation’s industrial research and development, two-thirds of our nation’s total exports of goods and services, and supports more than 20 million high-paying jobs.

Take a look around West Sac, Rancho Cordova, Power Inn/Florin Rd. The industrial buildings are full of manufacturers. The weak dollar and high shipping costs are making local manufacturing much more attractive.
Take a new mattress and furniture manufacturer in West Sac. They have found savings of 6-8% on gross margins by building mattresses and furniture locally rather than ship from China. Even during a recession in housing related industries, they are growing at an amazing pace. They are in the process of moving into a new 100,000 sq ft facility due to the demand.

Diggin Deeper said...

" or 12 percent of our gross domestic product, accounting for nearly three quarters of the nation’s industrial research and development"

I don't think I'm buying the optomism.

If you're thinking that our manufacturing base is in a growth mode, you might want to consider that the US manufacturing work force has fallen from approximately 32% of total workforce in 1960, to 17% today...nearly a 50% decline in total workforce...it's one of the key reasons that wage growth has declined...a skilled machinist gets paid better than median income, a hamburger flipper gets minimum wage.

While the soft dollar helps us initially, the resulting inflation, due to money supply, easily overcomes any benefits over time.

James said...

diggin deeper,

http://usinfo.state.gov/products/pubs/economy-in-brief/page3.html
You might read this in the April Beige Book.

"Demand was reported as strong for aerospace, aircraft, and defense goods, as well as for steel and food. Automakers increased production modestly in the Cleveland and Chicago Districts, but vehicle production declined in the Atlanta district. The Philadelphia District found that that demand for metals and machinery had increased. Many Districts cited strong exports generally. Most Districts saw a continued slide in the demand for goods related to residential construction."

James said...

Also, nowhere did I say manufacturing is in growth mode. I did want, however, to point out that it is not dead or insignificant part of the economy.

The weak dollar is not here for ever either. It, as with housing, will find a bottom when the commodity bubble bursts.

Patient Renter said...

it is not dead or insignificant part of the economy.

Right, but while not dead and not insignificant, it's not nearly enough.

Diggin Deeper said...

The only way the dollar strengthens is through much higher interest rates, much lower liquidity levels, the abandonment of US, state, and local government deficit spending, a workable handle on forthcoming entitlement programs, and a consumer that relieves personal debt loads and begins saving again....that's a tall order and requires huge sacrifices, none of which, imho, we'll see in an election year...or any time soon thereafter.

As far as the beige book is concerned, I put about as much stock in what it says as I do the monthly CPI and PPI numbers... the source has been THE source of money supply growth for over a decade.

That's not to say that interest rates won't rise regardless of any Fed action forthcoming...and take the RE market down another notch as more inventory loads in over the next year coupled with lower affordability at the same time. The 10 year continues to push upward and with each tick takes another band of Sacto buyers off the table.

James said...

"The only way the dollar strengthens is through much higher interest rates, much lower liquidity levels, the abandonment of US, state, and local government deficit spending, a workable handle on forthcoming entitlement programs, and a consumer that relieves personal debt loads and begins saving again...."

Yes, very true. Higher rates are coming. Check out the commentary from our in-house economist below. Deficit spending is way out of control. If we continue the pace of bond financing in CA, we will be paying more in interest expense in 20 years than education. I do think, though, when the rise in crude stops, OPEC nations will stop selling dollars to buy gold and Euros. The yen carry trade will collapse and the aussie dollar will fall. All these will help the dollar.
"The answer to which direction rates would take this past week came fast and furious. The upward rate jump started on Monday when better than expected pending home sales, technical trading as market players took off “steepener” trades (trades that expect the difference between short and long-term rates to increase), and a general move away from the safe haven of Treasuries, pushed the 2-Year Treasury rate up 34 basis points on the day to 2.71%.



But the sell off in Treasuries was by no means done, after comments by Fed Chairman Bernanke on Monday night and other Fed Officials throughout the week talked about fighting inflation. By the close of business Tuesday, the 2-Year Treasury had jumped another 22 basis points to 2.92% and by Thursday got over 3% for the first time since December. A week’s worth of hawkish Fed talk plus positive economic data in the form of Retail Sales (can you say “rebate check”) led the market to believe that Fed rate hikes could come much sooner and more severely than previously projected. Fed President Plosser managed to further spook the market by saying the Fed needs to “act preemptively” on price expectations.



The long end of the bond market, while not hit as severely as the short end, was not immune from inflation fear either. By the close of business on Thursday, the 10-Year Treasury rate had jumped 26 basis points on the week – and managed a few more on Friday to close out the week at 4.26%. Friday’s 6 basis point rise came on a slight drop in oil prices (to $135 per barrel), and a Consumer Price Index release which showed inflation mostly met the expectations of economists and thankfully wasn’t worse than expected. Around mid-day Friday, Former Fed Chairman Alan Greenspan managed to hit the news to echo some of Bernanke’s comments that the financial markets have made a “pronounced turnaround” since March and that the threat of a deep recession or substantial downturn has receded. This week felt a lot like the first panicky selling reversal of the safe haven panic-buying of Treasuries which hit a crescendo in March."

Diggin Deeper said...

"A week’s worth of hawkish Fed talk plus positive economic data in the form of Retail Sales (can you say “rebate check”) led the market to believe that Fed rate hikes could come much sooner and more severely than previously projected."

Do you really believe the Fed has the b**ls to raise rates in the face of a credit crisis, a real estate market that's on life support, or a financial system that goes begging every week to their discount window? BB pulls that lever and he gets yanked out of the game.

I can't see how there's anything positive or suggesting a bottom in the RE market. How can treasuries be a "safe haven" in a volatile interest rate market? You buy them today, rates rise, values fall, you lose.

The only way BB raises Fed funds rates appreciably (more than a token 25 basis pts) is if the financials are on firm footing and not subject to failure. Both Merrill and Lehman are on the ropes needing cash infusion monthly to keep the doors open.

It's one thing to say you favor a strong dollar, but as we've seen, actions don't back it up and it doesn't fool the world for long...

Inmo, oil has become the world's currency, gold will probably take its place soon enough unless the Fed takes bold action and raises rates above the REAL rate of inflation...something that would drive this economy over a cliff. Has BB got the b**ls, we'll see.

James said...

"it's one of the key reasons that wage growth has declined...a skilled machinist gets paid better than median income, a hamburger flipper gets minimum wage."

Another piece of anecdotal nothingness and I will get back to work. It is hard to find anyone who is willing to go into a skilled labor job. I have done financing for many machine shops in the region and their biggest complaint, "we can't find enough skilled employees." High schoolers don't want to go into the trades. The shop where I have maintenance done on my airplane has the same problem too. It caused them to shut down. They went so far as to go to the local high school and recruit students in the auto class. Offered to pay them $16-18 per hour to turn wrenches on airplanes. Not one kid responded. Their last mechanic got recruited to Alaska for higher wages and left them with no choice but to close the doors while jobs were stacked up outside the door.

James said...

"How can treasuries be a "safe haven" in a volatile interest rate market? You buy them today, rates rise, values fall, you lose"

Read a little closer. Money managers are moving away from this trade. And yes, when equity markets look bad and the economy looks to be sinking, treasuries are the safe play. Now with inflation back in the picture they are selling, thus pushing rates even higher.

Diggin Deeper said...

I read it, I guess my point is...when treasuries lose safe haven status, foreign investment, which we need monthly to finance our debt, begins to wane. The loss of confidence directs those foreign investments to where they're best treated...oil, gold, commodities, prudent central governments, currencies of hard asset rich nations, etc.

The Treasury International Capital Data (TIC reports) are beginning to indicate that monthly foreign investments are starting to fall below our monthly needs. This can't happen for too long or we'll have to finance our debt obligations through money supply...all the more inflationary....

Deflationary Jane said...

James, going to call BS on the skilled labor need. I didn't understand why you saw things so differently from some of us until you disclosed your occupation. Now it's makes sense. It's not that you aren't a smart guy, you just have a view from the top which is distored by all that glass >; )

We are finally getting vocational schools back but they are expensive. The problem with skilled and semi skilled isn't that there are no jobs, it's that they don't pay enough, especially if you have now student loans to pay off.

We a double handful of friends in the BA that are weilders and machinists. They got into those jobs through retraining programs. They have moved onto other locations and other fields because wages were bad, work conditions were bad, etc.

We should have kept our HS vocational training classes. Much more useful way to spend the money then on sports and french lessons.

James said...

You think the FOMC will continue to buy debt to increase money supply, or will the just let rates rise to a point where it become attractive to foreign investors?

James said...

"We should have kept our HS vocational training classes. Much more useful way to spend the money then on sports and french lessons."

Without a doubt. It has been pounded into students that they must go to college and be a lawyer or doctor, but some do not desire this path and are left to the side without skills to earn a decent living.

As far as calling BS on the need, I will give a list of business owners in SAC who can't find skilled labor. One company is so hard up the foreman has to drive to employee homes in the morning to get them out of bed to come to work. They have tried firing employees over and over, but end up rehiring because they can't find certified welders. Come to a SMACNA meeting and ask around.

Diggin Deeper said...

Both in my opinion.

I'm inclined to think rates will have to rise in order to attract the kind of investment necessary, something close to $30B a month. When you can buy govt bonds in Australia, a country that's shown to be prudent fighting inflation, with rates close to 6% and a currency moving against the dollar, what's not to like? We'd have to move the 10 year to over 5% to compete. Same for the Norwegian Krone. At that level it would probably equate to at least 8-8.5% on the mortgage side. And that really doesn't address inflation.

On the other hand, the FOMC has about $800B at its disposal and can continue feeding the financials and taking their toxic paper as "collateral". I think I've read they've lent out around $165B but they're trading dollars for trash. As they replace clean dollars for marked to model collateral, they boost the money supply and again allow inflation pressure to continue to build. $800B may sound like a lot of money but as of today, Goldman thinks there's at least another $65B the banks will write down. At the rate they're lending, it may not be enough when the last shoe drops.

All in all it means that those wanting to buy will be met by higher and higher financing costs

Diggin Deeper said...

That $30Billion foreign investment needed should be corrected to approximately $60B.

Patient Renter said...

You can have a labor shortage and low wages at the same time, and of course, one follows from the other. If welders were making 6 figures there would be no labor shortage.

smf said...

Here is another voice about lack of skilled labor!

That problem has been occurring for years.

It was well known from prior to the bubble that there was a lack of construction workers. That's why illegals were able to fill the vacuum fairly quickly.

In our business, we have had nothing but problems finding qualified people since about 1995.

The problem is that in the rush to get everyone a college degree, the trades have been left behind.

And no job pays really well when you start. But thru hard work and experience I know from experience that many in the trades will live very, very comfortably sooner rather than later.

Patient Renter said...

And no job pays really well when you start.

There are plenty of jobs that pay really well to start. You mean no skilled labor job?

Diggin Deeper said...

"If welders were making 6 figures there would be no labor shortage."

Actually good welders are making close to six figures with all the overtime they can burn. The energy business has basically sucked all the qualified welders out of the market to work on various projects at refineries, pipeline companies, powerplants, etc all over the country. $Billions are being spent after going through 20 years of contraction. Companies are hiring all engineering disciplines, trades, and warm bodies they can find. Once these projects are complete, the alternative energy or green business should be kicking in to pick up the slack.

Having been in the energy business for nearly 30 years, it's never been so good. But like anything else, it's all subject to change very quickly.

smf said...

PR:

Which job pays well when you start?

And how much do they pay?

Patient Renter said...

no job pays really well when you start.

Which job pays well when you start?


All kinds of lawyers, doctors, dentists, pharmacists, investment bankers, some types of brokers/money managers. These are (mostly) highly skilled jobs obviously, but to say that well paying starting jobs don't exist is not correct.

Diggin Deeper said...

Electrical engineers, mechanical engineers, civil engineers, etc, can find wages at $70K and up right out of college.

James said...

A couple more: nurses, fire fighters, police, CHP. None of these require a degree beyond an AA.

James said...

diggin deeper:

When should we start buying refiners again? It looks like margins are starting to widen finally for the independents?

smf said...

"but to say that well paying starting jobs don't exist is not correct"

No, you misunderstand.

When you first start any jobs, you are at the bottom of your earning potential.

To say that an electrician does not earn much is incorrect.

While the electrical engineer (whom we would not pay $70K in our office to any engineer right out of college) may start their career after college, an electrician can start at 18 and move up from there.

I have met plenty of tradesmen in the construction industry who moved up to becoming millionaires before the age of 40.

Buying Time said...

My father-in-law is a master stone/tile mason...he's been out of work for the last year.

Everyone want's cheap skilled labor. Unfortunately for my FIL employers tend to go for the cheap, rather than the skilled.

Patient Renter said...

employers tend to go for the cheap, rather than the skilled

Exactly. That's the point I was getting at above.

Diggin Deeper said...

James...

I'd look for $118-120 for an entry. With all the noise we'll probably see these levels before fall.

Diggin Deeper said...
This comment has been removed by the author.
Deflationary Jane said...

That's what I was getting at too but the masters of the universe blew me off.

PeonInChief said...

First, newspapers are still making profits of 16-19%--much higher than most other industries. They're just used to 25% and want to get back to that. (Ain't gonna happen.)

My problem with vocational education, though, is that, absent strong unions, it provides for highly erratic employment and declining wages over time. Public schools dropped vocational education as unions collapsed and these jobs no longer were reliable sources of decent wages and steady employment.

And the private schools that train people for these jobs are mostly rip-offs. Students take out huge loans for these "schools" and can't pay them back because the jobs the get pay $10 an hour.