An Alarming Rise In Layoffs

The number of layoffs at large companies dipped as the recession ended in 2009, but the practice is back with a vengeance, renewing concerns the trend will cause another period of steep job losses. The answer is that it will.

Some of America’s largest companies have discovered that the economic rebound is not strong enough to support their workforces. The interruption of whatever recovery began a year ago has also uncovered weaknesses in the management and structure of some firms that were once extremely successful. Cisco (NASDAQ: CSCO) is at the head of that list. It will fire 6,500 people, which is estimated to be 15% of its employees.

Goldman Sachs (NYSE: GS) was, until only recently, the premier investment bank in the world. Its earnings for the last quarter were weak. This in not because of the scandals that have hurt the firm’s image. Poor trading results have driven the company to say it will cut 1,000 people. Earnings from other large financial firms have been dismal enough that experts expect a wave of layoffs on Wall St. UBS announced it would fire 5,000 people. Dow Jones job site FINS reports that bank “downsizing” will reach 80,000 this year.

The largest series of job cuts will probably be by government, particularly at the federal level. The information technology management of the U.S. plans to close 800, or 40%, of its data centers, according to The New York Times. That will lead to tens of thousands of lost jobs. Governors and legislators have gutted, or will gut, the employment levels in their states to close budget deficits.

All of these dismissals appear to be randomly connected. They are not. Challenger, Gray & Christmas data show that announced layoffs still run at a rate of 40,000 or so a month. The news reports about job cuts this month will likely show up in the July employment figures, which should show a spike in new dismissals. The layoff plague is not isolated to one industry or one sector or another. It is no coincidence it has shown up in so many places and with such renewed frequency.

Only 18,000 nonfarm jobs were created in June, which means unemployment is at a tipping point. Estimates show that the U.S. economy would have to add 250,000 jobs a month for 66 months to return to 2007 employment levels. The trend is in the other direction.

Douglas A. McIntyre   Tell us what you think about this article  [email protected]