Consumers keep cutting back on debt as consumer credit falls at 7.5 percent annual rate to 2.5 trillion dollars.
Consumer credit decreased at an annual rate of 7-1/2 percent in April 2009. Revolving credit decreased at an annual rate of 11 percent,and non-revolving credit decreased at an annual rate of 5-1/4 percent.
Automobile finance rates dropped to 2.8 percent from a high of 7.1 percent (!!) in Q4 2008 due to the financial crisis. Rates were around 5 percent in 2007.

Job losses are slowing at 325K jobs lost last month.
Nonfarm payroll employment fell by 345,000 in May, about half the average monthly decline for the prior 6 months, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The unem ployment rate continued to rise, increasing from 8.9 to 9.4 percent. Steep job losses continued in manufacturing, while declines moderated in construction and several service-providing industries…Health care employment increased by 24,000 in May, about in line with its average monthly job growth so far in 2009. Employment in government changed little in May.

The decline in construction and professional services jobs slowed. This month, government jobs remain largely the same as opposed to the 92000 added last month.
Employment in construction decreased by 59,000 in May, compared with an average monthly job loss of 117,000 in the industry for the previous 6 months. In May, employment fell in nonresidential specialty trade contractors (-30,000) and in residential construction of buildings (-11,000).
Job losses in professional and business services moderated in May, with the industry shedding 51,000 jobs. This compares with an average loss of 136,000 jobs per month in the prior 6 months. The temporary help services industry, which had been dropping an average of 73,000 jobs per month over this period, saw little employment change in May (-7,000).

There have been anecdotal evidence that many of the job cuts were preemptive the past few months when businesses were uncertain of the future prospects and cutting so they will not be caught offguard. The increasing productivity numbers seem to pan this out. Usually productivity falls in a recession.

Treasury interest rates increased as a result of the job news but an improving economy will reduce corporate rates as investors are willing to take more risk and the interest rate spreads tightens. But eventually, a rising rate environment will lift all boats.

With revenues dropping more than 10 percent, Yahoo is laying off another 700 workers, another 5 percent of the workforce. Interesting quote from the new CEO Carol Bartz showing the rudderless nature of Yahoo’s business.
Yahoo dumped about 1,000 jobs in February 2008 and another 1,500 or so late last year while co-founder Jerry Yang was still running the company … Yahoo product managers, in particular, appear to be among the most likely to receive pink slips, based on Bartz’s blunt comments. “We sort of had one product management person for every three engineers, so we had a lot of people running around and telling people what to do, but nobody was doing anything,” Bartz said.
Meanwhile, after a long drawn out decline, Sun Microsystems is being bought out by Oracle for $5.6B , as the valley undergoes a reverse merger evolution where companies are subsumed instead of being created. I would expect Oracle, IBM , HP , Cisco to continue this process as they slowly encroach on each other’s territory in a relatively static pie compared to the go go years of old.
With Sun, Oracle will more directly compete against I.B.M., H.P. and other giants selling products and services used in corporate data centers by big corporations. The move by Oracle is part of the trend of the largest technology companies to assemble more offerings — hardware, software and services — for corporate customers, often through acquisitions, as I.B.M., H.P., Cisco and Oracle have all done in recent years. “Oracle is transforming itself into a soup-to-nuts information technology vendor,” said Gordon Haff, an analyst at Illuminata, a technology industry research firm.
Among industry rivals, the Oracle-Sun deal, analysts say, has the greatest potential impact on I.B.M. and H.P. “This deal promises to revitalize a systems competitor that I.B.M. and H.P. were writing off as dead,” Mr. Haff told The Times. Oracle can offer a more complete set of corporate software, from Sun’s operating system and programming tools to Oracle’s database and business applications to automate operations like finance and customer relations management.
But the layoff toll on the valley is not going to small.
But industry analysts estimated that Oracle’s cost savings from Sun operations suggest job cuts of up to 10,000 workers from Sun’s payroll of more than 30,000.
In purchasing Sun, Oracle gets a hold of mySQL , an open source database software package, the fate of which now is questionable since Oracle does not subscribe to the open software mantra with the same zeal as Sun did. It’s not a good business as shown by the following numbers.
Sun, which last year spent $1 billion to buy MySQL’s creator, said the business generated just $81 million in billings in the December quarter. That was 55% more than the year-earlier period, however, making it one of Sun’s fastest-growing segments.
MySQL is widely used by companies such as Facebook Inc. that operate hundreds or thousands of servers to run Web sites, while Oracle’s databases are best known as a foundation for companies to build programs to run internal operations

Another Silicon Valley firm KLA-Tencor cuts 10 percent of the workforce, about 600 jobs. This reduction is on top of the 900 jobs eliminated in November, totaling to a huge 25 percent reduction in the size of the company’s employee count. KLA-Tencor is a large supplier of process control and yield management solutions for the semiconductor industries, and is a S&P500 company.
KLA-Tencor Corporation (NASDAQ: KLAC) announced today that, in continuation of its efforts to control costs and in response to depressed market conditions, the company will reduce its global workforce by approximately 10 percent. This reduction is in addition to the company’s workforce reduction that was announced in November 2008. The reduction is one of many cost-saving actions being undertaken by KLA-Tencor that are designed to help reduce the company’s quarterly non-GAAP operating expenses to a range of $140-145 million per quarter by the end of calendar year 2009, adjusted from the company’s previously announced target of $165-170 million per quarter.

Agilent is letting go 2700 more of its staff as sales tank 30 percent.

Along with the 1,400 job cuts already announced in recent months, Agilent — which was spun off by technology giant Hewlett-Packard Co. 10 years ago — has now slashed about 20% of its global work force, which numbered 19,600 before the cuts, the company said. Agilent, based in Santa Clara, Calif., had 43,000 employees when it was first spun off from H-P.

In a major reduction in force, National Semiconductor, a long time stalwart being one of the original Fairchild’s eliminates 1700 jobs of the 6500 strong workforce as sales in the latest quarter tanks 36 (!!!) percent and bookings fall 25 percent. Last year, the company announced a smaller layoff. Inexplicably, the company is still paying a dividend.
…
In response to economic conditions and related business levels, National will take actions in the fourth quarter of fiscal 2009 to reduce overall expenses and shift more of its R&D investments towards new and emerging growth opportunities. As part of the plan, the company will eliminate approximately 850 positions worldwide in product lines, sales and marketing, manufacturing and support functions. Notification to affected employees will begin immediately.

As part of the manufacturing consolidation plan, the company will close its assembly and test plant in Suzhou, China and its wafer fabrication plant in Arlington, Texas. The closures will occur in phases over several quarters, eventually resulting in the elimination of an additional 875 positions. The volume currently being supported by these two facilities will be transferred primarily to other National locations. After the consolidation, National will have three manufacturing facilities: wafer fabrication plants in South Portland, Maine and Greenock, Scotland and an assembly and test facility in Melaka, Malaysia.

Marvell Semiconductor , a Santa Clara company, is laying off 850 workers , 15 percent of the workforce, as its revenues drop 39 percent in the latest quarter ending January. Improbably, the CFO is projecting a bottom this quarter, which is hard to believe. The salary freeze and reduction has been imposed in other companies recently. Most of the revenue shortfall is due to deterioration of the PC market with the rest about 10 percent each due to consumer products and enterprise networking products.

However, Chief Financial Officer Clyde Hosein said … “It looks like that’s the bottom from a revenue point of view …. The strategy for the company, at least financially, is to now drive improvements in our bottom line,”… The job cuts will come from all geographies and areas of the company, Marvell said, but it did not exit any businesses. The company has also imposed a company wide salary freeze, cut some salaries, suspended bonuses and consolidated facilities.

Spansion, a local Sunnyvale chip maker, is filing bankruptcy as chip sales drop. The company , a joint venture between AMD and Fujitsu, is the 3rd largest flash memory maker in the world. Earlier last week, the company laid off 3000,  35 percent of the workforce.

Only South Korea and Taiwan have signalled a willingness to help chip makers during the recession, while the U.S. has focused on financial institutions and auto makers.

Worldwide chip revenue is expected to fall 20 percent year-on-year to $199.2 billion this year, according to In-Stat. Industry revenue won’t return to 2007 levels until at least 2012, the market researcher added.

In other news, HP recently instituted salary reductions instead of layoffs. If this becomes a trend, deflationary pressures could mount.

He said he will take a 20 per cent base pay cut: “I’ll be asked by investors, ‘Where’s the job action, where are you taking out this roughly, 20,000 positions?’ Well, I don’t want to do that. …

“There are pockets where restructuring needs to happen, and areas where actions will be taken as part of our ongoing workforce optimisation process. But at a company-wide level, I don’t believe a major workforce reduction is the best thing for HP at this time.”

Executive council members will have base pay trimmed by 15 per cent; other execs will see base pay reduced by 10 per cent; “exempt employees” base salary takes a five per cent hit; and “non-exempt employees” base pay drops 2.5 per cent.

Intel announces layoffs of 6 percent of their global 84000 workforce via factory closures including a wafer production plant in Santa Clara.

Exports from Asian economies tank in the 4Q at double digit levels as global trade slows down drastically due to the credit crunch and ensuing effects on consumer confidence.

In the fourth quarter, Korea’s goods exports fell a seasonally adjusted 11.9% from the previous three-month period — the biggest decline since the 1979 first quarter. Exports were down 11.5% from the same period a year earlier.

Japanese exports in December tumbled an unprecedented 35 percent from a year earlier, data on Thursday showed, while a measure of business sentiment hit a new low.
The figures showed a collapse in demand across the board with record falls in shipments to the United States, Europe and Asia, showing how the global crisis is reaching all corners of the world economy.

China slows but bypasses Germany as the world’s third largest economy.
The weak fourth quarter dragged down China’s 2008 annual growth to a seven-year low of 9 percent, breaking a five-year streak of double-digit expansion. It was a steep drop from 2007’s 13 percent, which saw China pass Germany to become the world’s third-largest economy after the United States and Japan.

AMD is cutting another 10 percent of its workforce with 1100 jobs being axed. The company is caught in a double whammy of an economic slowdown and intense competition from its huge rival Intel. Top management is taking a  token 15-20% pay cut out of their massive pay packages while  the rank and file gets a “temporary” 5-10% salary cut. Cutting the CEO’s pay to one dollar will be more appropriate for this time and age. AMD is one of the first major company reducing salaries for rank and file workers. Is this the start of a deflationary trend ?

Intel is not doing well either with earnings dropping 90 percent from last year and sales dropping 20-30 percent from last year.

The entire industry is in hard times since personal computers are mostly discretionary expenses. In recent years, there also hasn’t been any killer new applications which will force upgrades.

Where is the innovation which is key to getting out of this hole ?

The firings represent AMD’s third round of major layoffs in the last year. AMD cut 600 workers just last month, and earlier in 2008 jettisoned 1,600.
Pay for workers who survive the cuts will shrink. AMD’s CEO Dirk Meyer and executive chairman Hector Ruiz, the former CEO, will see their salaries slashed by 20 percent.

In other news, Circuit City is shutting down all its 567 stores eliminating 30000 jobs as it enters Chapter 7 bankruptcy. CC is the second largest retailer of consumer electronics in the US behind Best Buy.  Circuit City infamously fired its seasoned staff replacing them with new hires, impacting customer service as a result.

Circuit City now joins the rank of the many retailers which have fallen victim to the bursting of the financial bubble along with other formerly familiar names such as Mervyns, The Sharper Image, Linens and Things, Peir I Import.  Cupertino is home to a Mervyns store opposite Target.

Motorola announces ANOTHER 4000 job cuts on top of the 3000 November last year, primarily in its mobile phone unit.

“The actions we are taking today in our Mobile Devices business will allow us to further reduce our cost structure and positions us for improved financial performance in 2009,” said Sanjay Jha, co-chief executive officer of Motorola.