January the Cruelest Month for Job Cuts

U.S. companies announced plans in January to eliminate more than 142,000 jobs, with the hard-hit auto, technology and retail sectors absorbing the worst damage, according to a report released Tuesday.

The 142,208 job cuts were almost three times the number announced in January 2000 and represented the largest monthly reduction in the eight years that Chicago firm Challenger, Gray & Christmas has compiled the data. DaimlerChrysler, Lucent Technologies and AOL Time Warner were among the firms announcing cuts.

The study added to other recent evidence that layoffs are intensifying as companies struggle to maintain profit margins amid weakened demand for their products.

Nevertheless, some economists said the statistics paint too gloomy a picture of both the job market and the U.S. economy.

The key, they said, is that an announcement of a job cut is not the same as actually firing workers. Companies typically carry out reductions over several months or even years, and may accomplish many of them through attrition and by not filling open slots, rather than through actual firings.

Also, the Challenger study does not show that many new jobs are being created to compensate for those being dissolved, economists said.

The Labor Department reported Friday that the economy added a net 268,000 jobs in January as growth in service-industry positions more than offset losses in the manufacturing sector.

With the Federal Reserve moving aggressively to recharge the economy through interest rate cuts, some economists predict that job cut announcements will decline in coming months.

“You’re not going to stay at those high levels. No way,” said Anthony Karydakis, economist at Banc One Capital Markets in Chicago.

Job cutting ballooned in December, when companies announced plans to slash 133,713 jobs. That was more than three times the monthly average in the first 11 months of the year. December and January mark the first time that layoffs have exceeded 100,000 in back-to-back months, Challenger Gray said.

“It’s indicative of how quickly employers today are cutting [jobs] when things start to turn south,” said John Challenger, the firm’s chief executive.

The largest number of job cut announcements in January were by companies based in the Midwest, where auto makers and other beleaguered manufacturers make up a large portion of the employment base. The auto industry reported the most cuts--34,959, or one-fourth of the total, the report said. DaimlerChrysler said last month that it would eliminate 26,000 jobs.

California-based companies made up just 8% of the announced job losses in January, even though three technology-related industries--telecommunications, Internet and computers--accounted for almost one-third of the total reductions, according to the report. The three tech groups accounted for a combined 44,851 job cuts, up from 24,007 in December.

However, it’s unclear which regions would ultimately suffer actual job losses. The Challenger Gray report groups layoffs by the state in which a company has its corporate headquarters and doesn’t analyze whether the cutbacks would actually occur in other states where the companies have operations.

Despite the heavy job reductions at dot-coms and in other tech sectors, experts said many of those workers should have a relatively easy time landing new positions.

“They should be able to find jobs faster than workers with fewer job skills,” said John Mueller, chief economist at Lehrman Bell Mueller Cannon, a Chevy Chase, Md.-based economic research firm.

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Boom in Pink Slips

Companies announced 142,208 layoffs in January, a record since pink-slip compiler Challenger, Gray & Christmas began counting layoffs monthly in 1993. January’s announced cuts were dominated by the auto and telecom industries.

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Announced Job Cuts

January 2001: 142,208

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January Cuts by Industry

Auto: 34,959

Telecom: 22,060

Retail: 15,344

Internet: 11,887

Computer: 10,904

Food: 8,672

Consumer goods: 6,735

Transportation: 6,063

Utilities: 6,027

Aerospace: 5,045

Source: Challenger, Gray & Christmas