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Layoffs Finally Slowing Down

Published Friday Aug 7, 2009

After falling to a 15-month low in June, planned job cuts announced by U.S. employers jumped 31 percent in July to 97,373. It was the first increase in monthly job cuts since January, according to global outplacement consultancy Challenger, Gray & Christmas, Inc., which released its latest report on downsizing activity Wednesday.

Despite increased job cuts, the July total was 6 percent lower than the same month a year ago, when employers announced 103,312 cuts. This marks the second consecutive month in which the job-cut total was lower than the same month a year earlier. Job cuts fell 33 percent in June to 74,393, the lowest monthly total since March 2008.

So far this year, employers have announced 994,048 job cuts, 72 percent more than the 579,260 announced in the first seven months of 2008. The 2009 year-to-date total is now less than 230,000 announced job cuts from surpassing the 2008 year-end total of 1,223,993.

After June's surprisingly low job-cut total, a July rebound was not entirely unexpected.  While there are signs that the economy is stabilizing and the pace of layoffs slowing, we are still a long way from a full recovery. In fact, monthly job cuts are likely to return to levels in excess of 100,000 by the fourth quarter, said John A. Challenger, chief executive officer of Challenger, Gray & Christmas. 

The July surge in job cuts was led by firms in the transportation industry, which announced plans to reduce payrolls by 27,954 positions in July, up 400 percent from a June layoff total of 5,587.  Employers in this sector have announced 61,578 so far this year, a 13 percent increase from the 54,411 transportation job cuts announced through July 2008.

The telecommunication sector also experienced a significant increase in layoffs last month, with job cuts surging 209 percent from 802 in June to 17,601 in July. 

Meanwhile, the automotive sector, which leads all other industries in year-to-date job cuts with 122,212, has seen layoff announcements decline in each of the last three months.  These companies announced 2,716 job cuts in June, which is the lowest monthly total for this sector since June 2008, when 2,356 automotive job-cut announcements were recorded.

Declining layoffs in the automotive industry may not be indicative of a turnaround. Instead, these employers simply may not have any room for additional job cuts if they hope to build new fleets of more eco-friendly cars, said Challenger.

With consumer and business spending at a standstill, transportation companies have little choice but to make further cutbacks in staffing.  However, we could see a surge in hiring around the holidays, even if there is only a marginal increase in retail sales, said Challenger.

The job cuts in the telecommunication sector, on the other hand, appear to be more permanent.  The cuts, led by workforce reductions in Verizon Communication's land-line division, reflect a shift in consumer demand from traditional telephone service toward wireless-communication options. The hope is that increased hiring in the wireless sector will help offset some of the losses in the more traditional divisions, said Challenger.

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