Layoffs spread, CEOs see more pain ahead Thu Dec 4, 2008 12:51pm EST
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By Scott Malone
BOSTON (Reuters) - Fear of a deepening recession is spreading throughout
corner offices across corporate America, prompting chief executives in all
sectors to slash thousands of jobs as they scramble to find ways for their
companies to survive the worst economic crisis since the Great Depression.
AT&T Inc and DuPont Co led the list on Thursday of blue-chip U.S. companies
laying off workers in the weeks before the Christmas holiday. A number of
surveys showed that CEOs were planning even more cuts.
The Business Roundtable's quarterly CEO Economic Outlook Index tumbled to
16.5 in the quarter, the biggest drop it has ever taken, to the lowest point
by far in the survey's six-year history. A reading below 50 means that CEOs
expect contraction rather than growth.
The index had stood at 78.8 in the third quarter; the prior low of 49.3 was
recorded in the first quarter of 2003.
"The first quarter and second quarter of next year are going to be negative
and therefore, given the cost pressures we are seeing, they are really
tightening their operations and really tightening their growth priorities,"
said Harold McGraw, chairman and CEO of U.S. publisher The McGraw-Hill Cos,
who serves as chairman of the Roundtable.
McGraw said companies were counting on more stimulus action from Washington
to buoy the economy.
The CEOs, who were polled between November 3 and November 17, said they
expect the U.S. economy to be flat overall next year, with recovery in the
second half offsetting a weak start.
The majority, 60 percent, expect to cut their U.S. head count over the next
six months. Fifty-two percent expect to cut U.S. capital spending and 45
percent foresee a decline in sales over that time period.
Business Roundtable's 160 member companies together employ almost 10 million
people and generate $5 trillion in annual revenue.
SPREADING DOWNTURN
The news was the latest sign that the global economic downturn, which
started with the collapse of the U.S. subprime mortgage market, is
worsening.
Top U.S. phone company AT&T said it would eliminate 12,000 jobs, chemical
maker DuPont announced it aims to cut 2,500 positions and auto parts maker
Hayes Lemmerz International Inc disclosed plans to reduce its headcount by
about 1,700.
AbitibiBowater Inc, Viacom Inc, Steelcase Inc, UTi Worldwide Inc also
unveiled job-cut plans.
The year-long recession, prolonged housing slump and deepening credit crunch
have already taken a heavy toll on U.S. employment, with the Labor
Department reporting that the number of workers claiming jobless benefits
was at a 26-year-high.
U.S. data due out tomorrow is expected to show that employers cut 340,000
jobs in November, according to a Reuters poll of economists.
Over time, the cuts become part of a self-reinforcing cycle, hurting
consumer spending -- which is responsible for the lion's share of U.S.
economic activity -- and further pinching corporate results, economists
said.
"You can't pay people if you don't have the revenue to support that payroll
or can't obtain the credit," said Michael Goodman, director of economic and
public policy research at the University of Massachusetts' Donahue
Institute. "But collectively, those actions can make economic conditions
worse and fuel this self-reinforcing cycle."
Still, there is no dearth of data reinforcing the grim picture for working
Americans.
A survey by Chief Executive magazine found that 75 percent of CEOs expected
employment to fall over the next quarter.
Another study by The Hackett Group predicted that some 350,000 U.S. jobs in
corporate finance, information technology and other back-office functions
would move offshore to India and other low-cost countries over the next two
years.
(Reporting by Scott Malone; editing by Gunna Dickson)
--
"Usually when people are sad, they don't do anything. They just cry over
their condition. But when they get angry, they bring about a change."
- Malcolm X, Malcolm X Speaks, 1965
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