Jobless Executives Spend Down Reserves

For executives temporarily living the good life on severance pay, the future looks grim. Many top earners, especially in the financial sector, lost jobs that will never return. Credit-swap specialist, anyone?  So what are former $200,000-a-year bank executives and erstwhile marketing honchos doing these days to get back in the ol’ rat race?  Mostly, they are hoping the economy will revive, but not setting their sights too high, according to an article in yesterday’s edition of the Wall Street Journal. Many executives who are currently unemployed evidently went into the downturn without having foreseen its severity. Rather than cut back on amenities, they continued to spend on frills, maintaining the lifestyles they’d enjoyed before they lost their jobs.

It’s likely that few of them had imagined the recession would be as severe as it has been, or that it would last for years rather than months.  Even those who made relatively cautious assumptions about the economy figured they would be back on the job within six months. Instead, with severance funds depleted, there are no jobs in sight – at least, not at salaries comparable to what they were making before. To make ends meet, they are downsizing their living quarters or moving in with the folks and eliminating trips to Starbucks.

Reams of Resumes

They have also been sending out resumes by the ream, apparently to little avail. Amidst record long-term joblessness, according to the Journal, more than a third of those out of work have been looking for more than six months.  This is the worst statistic this category has produced since the government began tracking it in 1948.

It is predictable that a similar story will soon be told concerning the retail sector. How long can store owners hang on before they throw in the towel? The answer is about 18 months, according to a highly successful building contractor we know whose family has worked with area businesses for more than 70 years.  This man sold his firm last year but still keeps in touch with the retail community.  He says many store owners who have been living off reserves are ready to pack it in. “If your business is very successful, you can probably weather severe times for about 18 months,” said our friend. “But that’s about it.”  The most difficult aspect of these hard times for firms that are surviving is that none of their owners can see how, or when, the economy will emerge from its depths. “It makes it tough to hang on if you can’t see light at the end of the tunnel.”

Rick Ackerman

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Rick Ackerman is the editor of Rick’s Picks, a daily trading newsletter and intraday advisory packed with detailed strategies, fresh ideas and plain old horse sense. You can subscribe by clicking here.