A New Era of Job Cuts Hits High-Tech Firms
Amid growing signs that the Asian economic crisis is cooling off America’s long-running business boom, job cutting is making a big comeback, particularly at semiconductor companies and other high-tech concerns.
Analysts say the Asia-related layoffs and corporate retrenchments, on top of the short-term impact of the recently settled strike at General Motors, will lead to weaker numbers today when the federal government reports on July’s employment picture. Many predict that the U.S. jobless rate will edge up to 4.6%, from 4.5% in June.
For California, whose rebound from a severe recession in the early 1990s has been bolstered by high-technology business and trade with Pacific Rim nations, the Asia-related job cutbacks are especially worrisome.
The retrenchment trend was highlighted in a report released Thursday showing that major companies announced plans to eliminate 321,217 jobs nationwide during the first seven months of 1998, up 37% over the same period last year. Last month alone, employers announced they would chop 50,774 jobs through layoffs and other means, producing the highest cutback total for July in five years.
“Those who doubt the impact of the Asian financial crisis on the economy need look no further than the semiconductor, computer and electronics industries, which rely heavily on the Asian market. Nearly one out of every three job cuts this year has come from one of those sectors,” said John A. Challenger, executive vice president of Challenger, Gray & Christmas, the Chicago-based outplacement firm that publishes the monthly job-cutback report.
Robert A. Brusca, chief economist at Nikko Securities in New York, added that “the Asia effect is grinding away at the manufacturing sector of the economy.”
The Challenger, Gray figures focus only on job-cutback announcements and do not take hiring into account. Overall, the job market remains robust and employment is still growing, though apparently at a slower pace.
Many employers still complain that their businesses are hamstrung by a shortage of workers, and the nation’s jobless rate is hovering only slightly above the lowest level since the early 1970s.
If softer business conditions persist and corporate profits continue to weaken, analysts say, employers are likely to accelerate the job cutting. The reason, Challenger said, is that “Wall Street is breathing down their necks to meet earnings expectations.”
“The slowdown, up to this time, has been confined to manufacturing, and the losses are modest,” said David Hensley, an economist with Salomon Smith Barney in New York. “Job growth elsewhere has held up well.”
Jack Kyser, chief economist for the nonprofit Economic Development Corp. of Los Angeles County, said that in Southern California, “there’s still a shortage of people to work in construction.”
In other local industries, he said, “there are signs of things moderating, but nobody is saying, ‘I’m starting to think about laying people off.’ ”
Employment specialists in Silicon Valley, where many semiconductor industry companies that do substantial business with Asia have announced cutbacks, say most job hunters have a relatively easy time finding work.
“We have more openings right now than we have people to fill them,” said Robert G. Lee, who heads the unit of the temporary employment company Manpower Inc. serving Silicon Valley.
Recent statistics from the federal government also show declines in high-technology jobs. Employment in electronic components manufacturing, which includes semiconductors, peaked at 681,000 in March and fell 9,000 from that level by June. Likewise, the job total in computer and office equipment manufacturing has dropped 8,000, from its March peak of 381,000. Many of those cuts are attributed to declining sales to Asia.
Another big job loser has been apparel manufacturing. Although employment in the industry is in the midst of a long-term decline nationally, the losses have speeded up since the beginning of this year. One major exception has been Southern California, where apparel employment has held steady in recent months and where the industry is a key force in the local economy.
As of June, employment in the apparel and textile industries totaled 774,000, down 34,000 since December. Analysts have attributed the accelerated employment decline to migration of work to Latin America as well as increased imports from Asia, whose manufacturers have taken advantage of currency devaluations that cut the price of their goods in this country.
Some employers are trying to moderate their job cutbacks. National Semiconductor Corp., for instance, last week announced a plan to require employees to take vacation time during the company’s next fiscal quarter, which ends in November. The Santa Clara-based company, which announced the cutback of 1,400 jobs in April, said the more recent cost-saving move was intended to reduce the need for further layoffs.
National Semiconductor’s slowdown stems from “a temporary order crunch. You don’t want to drop a lot of people then get short when things pick up again,” said Bill Callahan, a spokesman.
In some cases, employers appear to be cutting workers’ hours rather than resorting to layoffs. Nationally, the average workweek in manufacturing was 41.8 hours in June, a relatively high level, but down from 42.2 hours in December.
Still, competitive demands, along with pressure from Wall Street, have forced many companies to shrink their work forces.
Fremont, Calif.-based Lam Research, a semiconductor equipment manufacturer, announced the elimination of 700 jobs in February. The company followed that with a decision in June to cut 1,100 more jobs, reducing its work force to 3,300.
“We downsized the company so we would be profitable. Nobody is sure when we’ll come out of this downturn,” said Lam spokeswoman Melodie Brenner.
Not all of the recent cutbacks have come in the slumping high-tech and apparel industries. This week, General Motors Corp. announced that it would slash its work force by as many as 1,000 jobs as part of a continuing streamlining unrelated to the recent strike.
Ford Motor Corp. announced a buyout program last month aimed at cutting its white-collar work force by more than 5,000.
July unemployment figures from the federal government will be available on The Times’ Web site today. Go to: https://www.latimes.com/jobs
* VIETNAM DEVALUES: A currency devaluation by Vietnam sparks fears of worsening regional crisis. D1
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Job Cuts Trend
There were 31% more job cuts announced by U.S. companies from February through July of this year than in the same period last year.
July 1997: 48,349
July 1998: 50,774
Source: Challenger, Gray and Christmas, Inc.
