The Layoff Domino Effect

Nov. 21, 2008— -- It started with real estate then spread to Wall Street. Now as the U.S. economy lurches into what appears to be a long recession, just about every American worker is at risk of being fired.

"I'm not trying to sound ghoulish … but these are going to be difficult times. I think there is no question about it," said Lawrence J. White, an economics professor at New York University's Stern School of Business.

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As one industry topples, it ends up putting pressure on many others, leading to a domino effect of job losses.

When home values plunge, Americans lose wealth or at the very least their sense of wealth.

"It's going to affect their spending. They feel less wealthy. They can't use their house as an ATM or piggybank," White said. "People will eat out less. They will tend to splurge less. They will be more cautious with their spending."

That means cooking at home instead of heading out to the local diner or renting videos instead of going to see the latest blockbuster at the multiplex down the road.

In turn, the waitress in that diner earns less in tips and has to cut back her own spending. And that movie theater decides to fire two workers because ticket and popcorn sales are down.

In the first 10 months of this year, 1.2 million American jobs have been eliminated. More than half of those came in just the past three months, according to the Labor Department. The nation's unemployment rate spiked in October to 6.5 percent, the highest level in 14 years.

And Thursday brought even more bad job news: new unemployment claims filed jumped to 542,000, the highest since the summer of 1992 when the nation was recovering from a recession. And that's just the new claims. The overall number of people now receiving unemployment benefits is more than 4 million.

Every single sector of the economy has lost jobs except for health care and education and even they are showing signs of weakness.

"I suppose the 435 members of the House of Representatives and the 100 members of the U.S. Senate may be immune from this. They still have their jobs. They still have their salaries and presumably they'll still have their staffs," White said. "Everybody else, we're looking at difficult times."