As United Technologies Fires 1,500, As Corporate America Lays-Off Its Own Customers

There is a fiction mostly written by executive outplacement firms such as Challenger Gray & Christmas that corporate layoffs are falling sharply.  Its  survey may be incomplete, or at the very least misleading. Job cuts may be down somewhat, but the habit of large companies firing workers, adopted as the economy dropped, is still the rule across much of the country.

United Technologies (NYSE: UTX), an extremely successful conglomerate, will cut 1,500 people. The announcement was made in concert with an increase in the firm’s profit projections. United Technologies stock trades near a 52-week high.

Pfizer (NYSE: PFE), another financially healthy company,  recently said it would cut 19,000 jobs as part of its merger with Wyeth.

The New York Times recently pointed out that mass layoffs are still a part of American corporate culture. Companies have learned that they can force more work out of worried employees anxious to keep their jobs. Productivity in American industry is still alive.What American management does not discuss often is that an unemployed worker is usually a customer of many companies. The fact refutes the idea that a recovery can be jobless. High unemployment is almost certainly the major drag on the sputtering improvement in GDP which may be 2% or perhaps less for the second quarter. The recovery could bog down even more in the second half of the year. That means the revenue assumptions in the federal budget will almost certainly be too high. The cost estimates, which do not include a rapid rise on long-term unemployment payments, will also be thrown off.

The stimulus package pushed through Congress over a year ago is considered by many economists and politicians to have been largely a failure. That is because it did not mainline money to companies that might hire but cannot or companies that might fire and do.

If job creation is the primary goal of the federal government now, then stimulus must go to those who can create jobs. That system is poorly created now and whatever system may be in place is dysfunctional.

Douglas A. McIntyre