----- Original Message -----
Sent: Thursday, July 28, 2005 12:35
PM
Subject: [Futurework] Future of
Work
And now back to
the Future of Work.
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Report on
Business: Money & Markets
EMPLOYMENT
A new worry for lacklustre U.S. economy: Big job cuts; Report
contradicts job growth consensus
The summer has brought with it hundreds of thousands of job cuts in
the United States, a barrage that could stall one of the slowest economic
expansions in U.S. history.
According to Challenger Gray & Christmas Inc., the slew of
large, high-profile U.S. layoffs which now number more than 200,000 since
May could signal an end to a lacklustre U.S. economic growth cycle that
started just four years ago.
This could be a sign that the economy may have reached the tipping point
of its expansion, and that we might soon move into the declining part of the
economic cycle, said John Challenger, chief executive officer of the
Chicago-based executive-placement firm, which also tracks U.S. employment
trends.
He said the forces slowing the U.S. economy rising energy prices, health
care costs, interest rates and tougher global competition are leading to
massive layoffs among a wide array of U.S. companies.
If the summer surge proves to be the first sign of an eventual economic
slowdown, this would be among the weakest expansions in recent times, Mr.
Challenger said. And while the mega-cuts might not filter down to the next
labour report, he said they might be a harbinger of more difficult job
conditions in the next year.
The report certainly contradicts consensus expectations that the U.S.
economy will generate 180,000 non-farm jobs in July. The unemployment rate,
which peaked in June, 2003, at 6.3 per cent, is expected to hold steady at 5
per cent, the lowest since September, 2001. The next U.S. jobs report is
slated to arrive Aug. 5.
U.S. employers added 146,000 new jobs in June, up from 104,000 in May.
Federal Reserve Board chairman Alan Greenspan has said the economy is in a
period of sustained expansion and that the labour market is improving despite
soaring energy costs, suggesting that U.S. interest rates will continue to
rise.
Mr. Challenger said the Fed will keep raising rates, because it is trying
to build up some ammunition in the event that it needs to cut rates to battle
the next economic downturn. Certainly, if this slowdown becomes more
manifest, they would not be able to justify any more interest rate hikes.
He said the slew of summer job cuts, and the fact that they are coming from
a gamut of industries, is worrisome. A growing number of white-collar job
cuts could erode economic stability and the housing boom as these
higher-income earners are unable to meet rising interest payments.
Although the summer months are usually light on staff reductions,
nearly 200,000 were announced in May and June, the Challenger report said.
Summer layoffs are currently on track to match or surpass those announced in
the first four months of this year, a period of typically much-heavier
downsizing.
In the past 10 years, the number of job cuts between May and August
were 20 per cent below the number announced in the first four months of the
year, and 26 per cent below the number announced during the last four months
of the year, Challenger said.
But this year, staff cuts were up 42 per cent in May and 35 per
cent in June from April, according to Challenger's research. Five out of the
six largest job cuts announced so far this year have occurred since May,
Challenger said.
In addition, the Challenger report noted that most of the job cuts have
been large, with individual companies cutting payrolls by more than 10,000
workers.
Last Friday, Dallas-based paper company Kimberly-Clark Corp. said it plans
to do away with as many as 6,000 jobs, mostly in North America and Europe.
Employees of Rochester, N.Y.-based Eastman Kodak Co. are also bracing for
pink slips. The money-losing photography company raised its job-cut target to
between 22,500 and 25,000 workers from an earlier target of between 12,000 and
15,000.
And Palo Alto, Calif.-based computer manufacturer Hewlett-Packard Co. plans
to eliminate 14,500 jobs, nearly 10 per cent of its work force.
In direct contrast, Canadian layoff announcements have been few and far
between this summer.
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