Another Weekend of Mass Layoffs

Challenger, Gray said planned layoffs announced in September were up more than 200% from a year earlier to 115,000. That figure appears to be on the rise, and the latest layoffs, or corporate plans that presage them, happened this weekend. That is a bad sign for employment statistics announcements for the balance of the year.

Philips Electronics said it will fire 4,500 people. Its third-quarter figures were below its expectations. Its plans to sell its TV division have failed. The prices of consumer electronics such as TV screens, which have become a commodity, have fallen faster than production costs. It may be that no one wants the Philips business because it cannot be made successful.

Kinder Morgan (NYSE: KMI) will buy rival El Paso (NYSE: EP) for $21.1 billion. The companies announced that the merger will allow them to eliminate $350 million per year in expenses. The firms have workforce structures that mirror one another. So count on the merger to result in the loss of thousands of jobs.

There has been some question about whether mass layoffs like those of 2009 will return. That answer is yes, although the force of the new ones may not be as great as those of two years ago. The 2009 employment disaster caused the loss of 500,000 jobs in the U.S. in some months. Since most of those jobs were never replaced, these new firings will dig a deeper joblessness hole. It just will not be dug as fast.

There has been some hopeful news about jobs in the past month. American retailers have added or will add about 400,000 temporary workers for the holidays. That is probably a false positive, though. Retail sales are only expected to rise between 2.5% and 3% this year. If that is true, almost none of the temporary jobs will become full-time ones.

And earnings season for the third quarter has begun. Fourth-quarter forecasts will come along with those reports. Most analysts who follow S&P 500 companies expect EPS results to be poor. That means margins for the final quarter of the year can only be protected by cost cuts.

If there is another surge in layoffs, it will happen in the next few weeks. The American economic recovery, as weak as it was, has run out of fuel.

Douglas A. McIntyre