A Trickle-Down Theory of Subprime Pain

Everyone knows the economy is poised for recession, right? And yet, some economic reports stubbornly indicate otherwise.

The number of job cuts corporations announced last month barely changed from January, for example. Challenger, Gray & Christmas, a global outplacement consultancy, said 72,091 job cuts were announced in February — fewer than the 74,986 cuts announced a month earlier, and 14.2 percent less than the number of job cuts in February of 2007.

These numbers were obtained from company announcements and are not reflective of the number of actual job cuts that occurred in February.

In a spot of good news for beleaguered Wall Street firms, the financial sector didn't top the list of industries cutting jobs. February was only the second month in the last seven that banks and brokerages weren't at the top of the list.

Even better, they weren't second on the list, either. The top two industries in February were government/non-profit and retail.

"The fact that these two sectors topped the job-cut list in February is clear evidence that the slowdown has moved beyond the housing and financial industries," said John A. Challenger, chief executive of Challenger, Gray & Christmas.

Indeed, pain from the subprime mess has filtered down to such unlikely victims as Wendy's and Hewlett Packard — at least if you believe what they tell their shareholders.

by Jennifer Lai