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Bankruptcies to Slam Economy
-- July 2, 2002
Just as we've warned, bankruptcies and worsening outlooks for corporate earnings are causing a rash of layoffs. As the unemployment rate mounts, we will likely see a big drop in consumer spending as well as an increase in personal bankruptcies. That, in turn, will drag down the economy even further.
The unemployment rate had edged down in recent months, but that was BEFORE new cases of accounting fraud came to light. Now, Adelphia, the sixth largest cable conglomerate in the U.S., has declared bankruptcy and will undoubtedly cut employees. Plus, WorldCom is getting closer and closer to bankruptcy every day -- and it has already announced that it will layoff 17,000 employees. We estimate that there are hundreds more companies who are cooking their books but have yet to be discovered. When they are, expect to see the unemployment rate go through the roof!
As that happens, consumer spending -- the linchpin holding the economy together -- will come undone.
U.S. Layoff Plans Rose 12% In June