Announced Job Cuts at Record High
Corporate misery spiked in July as U.S. companies, led by the telecommunications and computer sectors, announced plans to cut 205,975 jobs--a 65% increase over June and more than three times as many as a year ago, according to an unofficial survey released Monday.
The July total was the highest since the Chicago-based outplacement firm Challenger, Gray & Christmas began compiling the data in 1993. It brings the total announced job cuts for 2001 to 983,337, far ahead of the 677,795 announced cuts in 1998, the previous record.
The July report “provides further support that labor market conditions are softening, and we have not seen the bottom yet,” said Anthony Karydakis, economist at Banc One Capital Markets in Chicago. “What this tells you is businesses view economic conditions in the near term as shaky.”
The question, Karydakis said, “is whether the pace of the erosion is slowing. Are we still getting a deterioration in labor market conditions as fast as we were earlier in the year? There are some signs-- the Challenger survey not withstanding--that the pace may be slowing.”
He said those indicators included the government employment report issued Friday that showed a more moderate decline in nonfarm payrolls for July than June and the jobless rate holding steady at 4.5%.
The job cut announcements tracked by Challenger represent the intentions of businesses and do not always result in layoffs. Cuts can include buyouts, attrition, outsourcing and other means of reducing staffing. Challenger’s report is not seasonally adjusted, is limited to job cuts announced publicly and does not include private and smaller companies that make no announcements.
Still, some economists say the Challenger numbers could indicate a continued slowdown.
“Usually in a recession, the job cuts happen after the stock market drops and after output slows down and stops growing,” said Alec Levenson, an economist with USC’s Marshall School of Business. “And unemployment peaks after the stock market drops to the lowest point and after output has started to rebound. So, if indeed we are on our way into a recession, then this is consistent.”
July’s numbers included many companies cutting jobs for the second or third times, said John A. Challenger, chief executive of the firm that puts out the report.
“Everybody’s been hoping we’d have this V-like recession, that it would slow down quickly and bounce back,” he said. “And I think it is slowly dawning on people that it’s going to be a long digging-out process. These numbers suggest things are still getting worse.
“Maybe those Federal Reserve rate cuts are going to sink in in early 2002 and turn us around,” Challenger said. “I just hope they are not like some antibiotic that’s lost its strength against some new kind of economic flu we’re in now.”
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Pink Slip Boom
Announced layoffs through July have set a record.
Total announced layoffs each year in thousands:
Through July 2001: 983,337
Source: Challenger, Gray & Christmas
