Industry News and Information
Good Economic News: Manufacturers Resist Layoffs Despite Sluggish Sales
Steven RothbergPlanned layoffs fell to a 13-month low in June, as U.S.-based employers announced job cuts totaling 37,551 during the month. That is down 39 percent from the 61,887 announced job cuts in May, according to the latest report on downsizing activity released Thursday by global outplacement consultancy Challenger, Gray & Christmas, Inc.
The June total is 9.4 percent lower than the 41,432 planned job cuts announced during the same month a year ago. It is the lowest monthly total since May 2011, when employers announced plans to eliminate 37,135 workers from their payrolls.
At the midway point of 2012, job cuts total 283,091, an increase of 15 percent from a 2011 six-month total of 245,806. The pace of downsizing has remained relatively steady throughout the year, with job cuts in the second quarter totaling 139,997, just two percent fewer than the 143,094 job cuts announced during the first three months of the year. Second quarter job cuts were up 22 percent from last year, when employers announced 115,057 layoffs from April through June.
While downsizing activity is up from a year ago, the 283,091 job cuts announced in the first half of the year remains relatively low by historical standards. In 2008 and 2009, first-half job cuts totaled 475,948 and 896,675, respectively. From 2001 through 2005, the first six months saw an average of 636,040 job cuts. Even in the “expansion” years, job cuts at the midway point totaled 436,458 in 2006 and 393,499 in 2007.
“Even with recent signs that the economy is headed for another summer slump or worse, including the first contraction in manufacturing activity in three years, employers appear reluctant to shed too many workers. While it does not take long to shrink payrolls, it can take a significant amount of time to rebuild them, particularly as reports of the growing skills gap becomes more widespread,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.
The manufacturing slowdown in June apparently did not lead to any announced plans for permanent layoffs during the month. All of the major manufacturing industries tracked by Challenger, including industrial goods, consumer products, aerospace and defense, and computers saw job cuts decline in June.
The heaviest job cutting activity in June occurred in education, where school districts and other organizations announced plans to let go 6,569 workers, nearly double the 3,536 job cuts announced the previous month. So far this year, the education sector has announced 24,815 job cuts, which ranks third among all industries through the first six months. Despite the high ranking, education job cuts are down 36 percent from this point last year, when job cuts in the sector totaled 38,704.
The biggest job-cutting industry through the first half of 2012 was the computer industry, which announced 34,380 job cuts. That is a more than ten-fold increase from the 3,178 job cuts announced by these firms in the first six months of 2011. Most of the first-half job cuts in this sector occurred in May, when Hewlett-Packard announced plans to eliminate 27,000 jobs.
The second-ranked transportation industry has also seen a significant increase in job cuts. Through June, this sector has announced 26,615 job cuts, up from 6,645 at the midway point of 2011. Most of the cuts in this sector have come from airlines, including American, United, Delta and SkyWest. Meanwhile, trucking companies, the other major area within the transportation sector, are actually struggling to find drivers.
“Overall, 15 industries have seen job cuts increase from a year ago, but we still are not seeing the level of downsizing that might foretell a double-dip recession. In several of the industries experiencing increased job cuts, the increase has come from one or two large announcements. In the case of the computer industry, HP accounts for the bulk of this year’s cuts. In consumer products, where this year’s 22,658 job cuts are up 144 percent over last year, 14,400 cuts or 64 percent of the industry cuts came from just two employers,” noted Challenger.
“This is not to say that there is nothing to worry about when it comes to the health of the job market and the economy. There have been many signs of ongoing weakness in business and consumer spending. In fact, one economist recently pointed out that without government spending and monetary intervention from the Fed, the economy most likely would be sinking.
“The problem is that the Fed is running out of fixes in its toolbox and it is unlikely that any type of stimulus spending is going to originate from Washington. Without the government propping up the economy, the responsibility falls to consumers and businesses and there is simply no evidence that either is ready to go on a recovery-sustaining spending spree,” said Challenger.
“Continued weakness in the recovery will further delay hiring, which will, in turn, further delay the full recovery. Whether or not we see an increase in job cuts depends on the length and severity of the recovery’s slowdown. Countries in the Euro zone are taking steps to shore up their economies, but they definitely are not out of the woods. The shock of an economic collapse in Europe would certainly ripple through our economy and could send us spiraling back toward recession.
“However, barring some major economic catastrophe, companies in the U.S. are likely to hold steady for the remainder of the year. We probably will not see a major ramp up in hiring or firing; certainly, not before the November elections. Even after the election and regardless of who wins, it could be several months until companies understand the full implications of the outcome and how to plan for the future,” said Challenger.
