Few events are more traumatic than losing your job. In fact, according to the well-known Holmes-Rahe Social Readjustment Scale, there are only seven events that are more stressful than getting fired, and they mostly involve death, divorce, a major injury or illness, or prison. Lately, though, a lot more people may be experiencing the stress of a job loss. There were 8.5 million Americans unemployed in May -- 1.6 million more than a year ago.

"The unemployment rate shot up by half a percentage point in May, the biggest single-month increase in over twenty years," says Alan Krueger, the Bendheim Professor of Economics and Public Affairs at Princeton University and former chief economist at the U.S. Department of Labor. "So from the standpoint of the labor market, it's certainly a downturn and I think one that we will be slow to recover from."

The job cuts have hit the retail and financial services sectors hard, and they illustrate problems in the economy in general. But they also point to opportunities for forward-thinking business leaders.

Retail and financial services

Since March 2007, 184,000 retail jobs have been cut, and more cuts are coming. According to Kurt Deneen, Gallup principal and expert on the retail industry, specialty retailers and small stores are the first to let people go. "For example, one major retailer just announced they're closing more than one hundred stores," Deneen says. "They've got thirty-plus people in every one of those stores. They can farm some of those folks out, but still, that's a lot of people, and that's only one chain."

One reason the retail industry is cutting jobs is because of the slowing economy. Fewer shoppers mean fewer sales, so fewer salespeople are needed. However, employees are consumers too. Unemployment, even in a single sector, can fuel the national cycle of reduced spending and increased job loss -- even if those losing their jobs didn't earn much in the first place.

Deneen notes that when retail stores cut jobs, part-timers are often the first to go. But full-timers aren't safe either. "The idea that the people losing their jobs are all high school kids is a bit dismissive," Deneen says. "Some of these people may be kids, but many aren't, and this is a rent check for them."

The job loss situation is even more acute in financial services. According to Challenger, Gray & Christmas, the financial industry leads all other sectors in job cuts this year by a wide margin; financial firms have announced more than 66,000 job cuts so far in 2008.

Douglas Berlon, Gallup's global practice leader for financial services, says the job cuts in the financial industry, like those in retail, are hitting various levels of labor. "It's coming mostly in middle management, very low-end jobs, and niche lines of business," Berlon says. "The volume of work is slowing down, so banks need fewer managers and processors. This is especially true for the small business, home loan, and home equity business lines. Those business lines are the bread and butter for many banks."

Now what?

Many of the 8.5 million people out of work are anxiously searching for a job. But will they find one? "It may take a while. Most will find a job," says Krueger. "But when the economy slows down, the duration of unemployment tends to increase. Some people will have a great deal of difficulty finding a new job."

Part of that difficulty is that businesses are cutting workers and ratcheting down hiring. Gallup's Net New Hiring Activity measure fell 1.1 percentage points from March to April and declined by 2.2 points between April and May. (See "Net New Hiring Activity Suggests U.S. Lost Jobs in May" in the "See Also" area on this page.)

According to Deneen, people working in retail may have the easiest time finding new work, assuming that the recently unemployed have access to the retail outlets that are likely to be hiring. "Full-time workers will find that big-box retailers and discount retailers are still hiring," says Deneen.

Things are going to be tougher in financial services. The job cuts are coming in lines of work that have been hit hard in recent months -- and when people aren't buying houses, for instance, mortgage departments aren't busy. So making lateral moves from one bank to another could be difficult.

However, many financial institutions are hiring people with the right attributes. "If you have transferable skills, there are probably opportunities," says Berlon. "Banking is still in desperate need of talented, highly motivated, engaged people in the customer-facing world." The problem is that taking the job could mean sacrifice, sometimes more than the jobless can bear. "The job might not be at the same salary level, it might not be in the same town, and it probably won't be the same role they had before," Berlon says.

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Article from The Gallup Management Journal