Home Interest rate U.S. jobless claims and job cuts rise as interest rate hikes begin to hit economy

U.S. jobless claims and job cuts rise as interest rate hikes begin to hit economy

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New claims for unemployment benefits in the United States rose again last week for the third week in a row, as Ford, Stellantis and other automakers announced job cuts. Interest rate hikes by the US central bank. aimed at driving up unemployment to undermine workers’ wage demands, increasingly seem to be having the desired effect as the US economy heads into a possible recession.

Ford World Headquarters in Dearborn, Michigan (WSWS Media)

Initial jobless claims rose to 251,000 for the week ending July 16, from 244,000 the previous week and well above the pre-pandemic weekly average of 218,000. The four-week moving average rose to 240,000, up 4,500 from the previous week. Hiring in June was down 5.4% from May, according to Linkedin data.

Other signs of impending recession abound. The price of copper, a key material used in manufacturing, has fallen 20% since January, hitting a 17-month low on July 1. Consumer confidence is at its lowest level since 1952 as incomes are eroded by inflation and new home construction slows.

The higher layoff numbers follow rate hikes of half a percent in May and three-quarters of a percent in June. Another halving to three-quarters hike is expected when the US Federal Reserve meets later this month. Rising interest rates impact borrowing and increase the cost of car loans, home loans, student loans and credit card debt.

The impact of the impending economic downturn is evident in the auto industry, which is particularly sensitive to rising interest rates, with Ford and several electric vehicle makers announcing major job cuts.

This week, Ford announced it was cutting 8,000 jobs, mostly in its “Ford Blue” internal combustion engine operations. The layoffs will largely involve salaried staff and are aimed at cutting costs to provide cash for investing in electric vehicles. Most of the cuts will take place in the United States.

Ford CEO Bob Farley said the company needs to cut costs by $3 billion by 2026, with savings coming from the company’s gasoline engine operations, which he says must become the “profit and cash engine” as the global automaker seeks to expand its EV operations.

The significance of this was explained at an automotive conference last February where Farley complained: “We have too many people. That would come as a surprise to workers who are forced to work 12-hour shifts and six-day weeks due to COVID-related labor shortages. What Farley meant, however, is that Ford wants to cut costs by further cutting production from a smaller, overstretched workforce.

US electric truck maker Rivian Automotive Inc. also plans to make layoffs. According to a Bloomberg report, the cuts could affect 5% of the company’s 14,000 employees. Rivian CEO RJ Scaringe said in a letter to employees, “Rivian is not immune to the current economic circumstances, and we need to ensure we can grow in a sustainable way.

Meanwhile, electric car maker Tesla is closing its offices in San Mateo, Calif., impacting 229 jobs. Tesla CEO Elon Musk has spoken about possible job cuts totaling 10% of the company’s salaried workforce, saying he has a ‘super bad feeling’ about the economy .

Stellantis also announced the indefinite layoff of 40 workers at its Warren stamping plant north of Detroit. This follows the layoff of workers at the nearby Sterling Stamping plant in June. Another 98 were made redundant in March. Management issued a boilerplate statement saying the layoffs were necessary to “operate the plant in a more sustainable way”.

The layoffs come as Stellantis is downsizing its Belvidere, Ill., assembly plant from 1,800 to about 800 workers. As workers are offered transfers to other Stellantis factories, the layoffs put a question mark on that.

A number of tech companies have also indicated plans to cut staff, including Google, Twitter and Netflix.

The Federal Reserve’s interest rate hikes, which are touted by the Biden administration as a way to fight inflation, are actually directed at workers’ attempts to raise wages to deal with the surge of the cost of living. Over the past few months, a series of militant strikes and contract struggles have taken place as workers resist the attempt by management and unions to impose wage deals well below the current annual inflation rate of 9 .1%.

However, the Federal Reserve’s efforts to raise unemployment to dampen militancy may produce the opposite backlash, serving to further stoke workers’ anger, as evidenced by posts filling Facebook pages in response to recent job cut announcements. jobs.

“Ford’s net income was $18 billion in 2021, its executive compensation $22 million, for a median total compensation ratio for all employees of 356 to 1. Its worker productivity, a faithful group, is absolutely not appreciated. They know where to cut costs, but those making the decisions in the boardroom are instead choosing to stoke inflation to feed their greed,” said one worker.

“Inexcusable. They made money off the backs of these employees and put it in the pockets of the top 1%?? Ford made a profit, it’s greed and nothing else” , said another.

While announcing cuts, on the one hand automakers have imposed forced overtime and hired hundreds of temporary and casual workers, who earn a fraction of the wages and benefits of older workers, to produce more vehicles.

The Stellantis layoffs are also drawing strong opposition, particularly the miserable treatment of casual workers. A young Stellantis employee in Detroit told the World Socialist Web Site Autoworkers Bulletin, “The company hires workers from the streets and makes them work 10 to 12 hours a day, six days a week. They barely have time to sleep, let alone do anything else, like trying to get to school. Every moment they are at work.

“But the factories are constantly down due to shortages of chips, dashboards and other parts. One week they work 60-70 hours, the next week they only work 30 hours. TPTs (temporary workers part-timers) cannot collect unemployment benefits and do not receive short-workweek wages like full-time workers.

“I can sympathize with them because I was TPT for years before going full time. Their paychecks are like Burger King’s. They make $15, they have health benefits but no profit sharing, and if they get laid off they don’t get a salary (SUB) like full-time workers. I was taking home $572 a week as a TPT when I started.

“They bring home maybe $700 a week after taxes now. If the plant is down for a day or two or a week, it loses $100 a day. How can a TPT, especially with a child or two, live on $400 or $500 a week? It’s impossible.”

To defend jobs and living standards, workers must adopt a comprehensive strategy. Ford and other automakers are cutting costs around the world as they seek to outsmart workers from different countries in a brotherly competition for jobs.

In Europe, Ford confirmed this month that it would close its plant in Saarlouis, Germany, by 2025, at a cost of 4,600 people at the plant and another 1,500 workers at related suppliers. Ford management, with critical help from unions, is pitting German Ford workers against workers in Valencia, Spain over who could offer the biggest cuts.

Meanwhile, Ford in India is closing its Chennai manufacturing plant in the state of Tamil Nadu this month, at the cost of 4,000 jobs and potentially tens of thousands more in supplier industries. The announcement of the closure sparked a militant strike by young factory workers, who were betrayed by their union.

The struggle to protect workers’ living standards against runaway inflation as well as the defense of jobs requires workers to organize independently of pro-corporate bureaucratic and union apparatuses. This means expanding the network of rank-and-file committees in the automotive, logistics, education, health care and other sectors within the framework of the International Alliance of Rank-and-file Committee Workers ( IWA-RFC).

The struggle to defend jobs and the standard of living raises the need for a fundamental reorganization of society. The myriad and escalating social problems facing humanity, from inflation and unemployment to the pandemic and climate change, cannot be solved within the framework of the capitalist system which subordinates all social issues to research private profit. This requires workers to fight for an international socialist program and perspective.