Job Cuts in December Were Lowest Per Month Since June

Posted January 05, 2012 by

Planned job cuts announced by U.S. employers declined in December to 41,785, the lowest monthly total since June, according to the latest report on downsizing activity from global outplacement firm Challenger, Gray & Christmas, Inc.

The December total was down 1.6 percent from 42,474 job cuts in November. Last month was up 31 percent from December 2010, when employers announced just 32,004 job cuts, which still stands as the lowest monthly total since 17,241 job cuts were recorded in June 2000.

While 2011 went out like a lamb in terms of downsizing activity, with employers announcing an average of just 42,339 job cuts per month over the final quarter of the year, the year-end job-cut total of 606,082 was 14 percent higher than the 529,973 job cuts announced in 2010. However, the 2010 year-end total was a 13-year low. The 2011 total is still well below the recession peak of 1288,030 annual job cuts reached in 2009.

The increase in job cuts in 2011 was due primarily to heavy job cutting in the government sector, where employers announced plans to eliminate 183,064 jobs, a 29 percent increase from 142,255 in 2010. Government job cuts were 188 percent higher than the second-ranked financial sector, which saw 63,624 job cuts this year.

A large portion of the 2010 job cut increase occurred in September, when job cuts hit a 29-month high of 115,730, more than double the 2011 monthly average of 50,507. Of the September cuts, 80,000, or nearly 70 percent of the total, came from just two organizations: Bank of America and the United States Army.

John Challenger of Challenger, Gray & Christmas“Job cuts in 2011 were dominated by the government and financial sectors. These two alone accounted for 41 percent of all the job cuts announced last year. The 183,064 government job cuts represent a record high for that sector, since we started tracking it in 2002. And, while the financial sector did not come close to its record high, annual cuts for the sector were up 165 percent from 2010,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“Unfortunately, these sectors are likely to continue to struggle in 2012. Washington is under immense pressure to cut spending and it looks like every deal to extend tax cuts, raise the debt ceiling and pass the budget will come with measures to cut spending, which can be expected to result in more job cuts.

“Additionally, there are still proposals to make massive cutbacks within the United States Postal Service. While its budget is not taxpayer funded, it has been ravaged by the growth of electronic mail. Involuntary layoffs at the Post Office could total as much as 120,000, according to one plan, with another 120,000 positions lost through attrition,” said Challenger.

“In the financial sector, the economic troubles in Europe will continue to be a cloud hanging over Wall Street in 2012. While temporary fixes have been put in the place for the time being, there is still heavy risk of a collapse, which would ripple quickly through the global banking system. On the home front, many banks are still saddled with millions of foreclosed properties worth a fraction of their original values,” he added.

The government and financial sectors were not the only areas to see increased job cuts. Continued weakness in consumer spending helped contribute to a 32 percent increase in retail job cuts, which totaled 50,946 in 2011, up from 38,751 in 2010. Aerospace and defense contractors felt the fallout from government cutbacks. These employers announced 34,759 job cuts last year, an 82 percent increase from 19,150 the previous year.

“While several other sectors saw increased job cuts, the pace of downsizing in most industries is still well below recession levels. But even as job cuts remain low in most sectors, employers still appear reluctant to add jobs. Net job gains picked up at the end of the year, after dipping in the third second and third quarters, but the pace of job creation is still too slow to make a significant dent in the number of unemployed,” said Challenger.

“Job creation is likely to remain slow and steady in 2012. Washington seems paralyzed when it comes to enacting policies that might spur job growth. Even if they were to pass some legislation that could help, the impact is rarely immediate and is typically smaller than anticipated.

“In the end, there may be little government can do to jump start job growth. It really comes down to demand and, right now, consumers and businesses around the world simply are not spending. So, there is little demand and, therefore, no compelling reason to ramp up hiring,” said Challenger.

“In addition to soft demand, two other factors could contribute to slow job growth in 2012: an immobile workforce and a mismatch of skills. Among employers that are hiring, many are complaining that it is difficult to find people with the right skills. This may seem counter intuitive in a labor market with more than 13 million Americans unemployed, but the problem is that many job seekers are unable or unwilling to move to where the jobs are being created,” said Challenger.

“Even if job seekers are willing to relocate, they may not have the skills employers are seeking. The areas hiring now and in 2012 will require specialized knowledge. Information technology, specialty manufacturing, nursing, and commercial construction are areas that are growing, but all of them require specialized skills. Medical jobs in Los Angeles and California seem to be increasing and always in demand due to the nature of the industry. Even areas like long-haul trucking, which is in desperate need of drivers, requires a certain level of training that many job seekers are unwilling to pursue. As a result, job creation will be weakened.”

That being said, it would be wrong for job seekers to assume that it is impossible to find a job. The latest available government figures show that employers hired 4,069,000 new workers per month between May and October. That was up from an average of 3,945,000 hires per month in the preceding six-month period. In October alone, employers hired 4,040,000 new workers and there were still 3,267,000 openings at the end of the month.

“It is important for job seekers to realize that every month about two million people quit their jobs. Another 250,000 to 350,000 retire, transfer to new locations, die or suffer a disability that prevents them from returning to work. Hundreds of thousands are terminated for reasons unrelated to cost-cutting. In many of these situations, employers are looking for replacements. Job seekers should be thinking about how to become one of the more than four million people hired every month,” Challenger concluded.

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