Economists still expect layoffs in the US and Europe to slow as the recovery gains momentum. Pessimists among experts on GDP growth and job losses believe that the major risk of a double-dip recession is that unemployment will keep rising well beyond the middle of next year.

Analysts who track corporate earnings were concerned that improvements in third quarter net income at many American companies would be due more to cost cuts than revenue growth. It turns out that the assumption was correct. Kraft (NYSE:KFT) which recently announced earnings, is a case in point. Its revenue fell in the September quarter, but earnings improved. The US firm will probably go ahead with its attempt to buy Cadbury. There would be a great deal of efficiency in the combination, which means thousands of people will be laid off if Kraft can convince Cadbury shareholders that its offer is irresistible.

Layoffs seem to have picked up in the last week or so, if the business press is a fair indication. Nokia-Siemens, a joint venture which is one of the largest companies in the global telecom equipment business, said it would fire 6,000 people. Johnson & Johnson (NYSE:JNJ), arguably one of the most successful companies in the US, will fire 8,200 people. Ironically, JNJ’s stock trades close to it 52-week high. Johnson & Johnson announced two weeks ago that earnings were up slightly to $3.3 billion. The firm also raised its full-year earnings guidance. The job cuts will make those forecasts even better.

The layoffs at banks are not over. HSBC (NYSE:HBC) said it will fire 1,700 people in the UK. Royal Bank of Scotland (NYSE:RBS) and CIT (NYSE:CIT) are expected to announce jobs cuts in the next week. Media companies are still cutting costs and people. Telecom companies continue to cut workers as their landline and wireless divisions struggle. Sprint (NYSE:S) is about to announced another round of cuts.

The Time Inc. unit of Time Warner (NYSE:TWX) is scheduled to fire scores of employees. Many analysts who cover the media industry believed that the layoffs from last year and earlier in 2009 would be sufficient to help earnings. Obviously, they are not. Advertisers might have improved the budgets for what they intend to spend online, in print, or over the air because they believe their own prospects will improve next year. There is very little evidence that the case is true.

Random lists of layoffs do not mean a thing. They do, however, show a trend when put next to a list of the major companies which are hiring people. That list is less than an inch long.

It has occurred to corporations in the barely growing parts of the global economy—the US, EU, and Japan–that corporate earnings are not going to be spectacular next year because revenues will not be rising significantly in most industries. Firing people and cutting other costs remains the most reliable path to improved earnings. That undercuts the belief that employment will turn in the right direction by the end of next year.

The day will come, and it may be far off, when the business media’s pages will be filled with news about large corporations which are adding to their staffs. Demand for products and services will be so great that companies cannot keep up with new sales based on the skeleton staffs they created during the recession.

Those headlines are a ways off, perhaps a year. Falling sales and M&A transactions which are based primarily on cost savings, no matter what the companies involved say, will be going on for a long time.

Douglas A. McIntyre

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