Job-Killing Recession Racks Up More Layoff Victims
WASHINGTON — The recession is killing jobs at an alarming pace, with tens of thousands of new layoffs announced Monday by some of the biggest names in American business _ Pfizer, Caterpillar and Home Depot.
More pink slips, pay freezes and other hits are expected to slam workers in the months ahead as companies desperately look for ways to survive.
"We're just seeing the tip of the iceberg _ the big firms," said Rebecca Braeu, economist at John Hancock Financial Services. "There's certainly other firms beneath them that will lay off workers as quickly or even quicker."
Looking ahead, economists predicted a net loss of at least 2 million jobs _ possibly more _ this year even if President Barack Obama's $825 billion package of increased government spending and tax cuts is enacted. Last year, the economy lost a net 2.6 million jobs, the most since 1945, though the labor force has grown significantly since then.
The unemployment rate, now at a 16-year high of 7.2 percent, could hit 10 percent or higher later this year or early next year, under some analysts' projections.
Obama called on Congress Monday to speedily enact his recovery plan, warning that the nation can't afford "distractions" or "delays."
With the recession expected to drag on through much of this year, more damage will be inflicted on both companies and workers.
The mounting toll was visible Monday as roughly 40,000 more U.S. workers got the grim news.
Pharmaceutical giant Pfizer Inc., which is buying rival drugmaker Wyeth in a $68 billion deal, and Sprint Nextel Corp., the country's third-largest wireless provider, said they each will slash 8,000 jobs.
Home Depot Inc., the biggest home improvement retailer in the U.S., will get rid of 7,000 jobs, and General Motors Corp. said it will cut 2,000 jobs at plants in Michigan and Ohio because of slow sales.
"We are seeing no improvement in labor market conditions," said Sal Guatieri, senior economist at BMO Capital Markets Economics. "This year could be as bad as last year in terms of layoffs."
In response to deteriorating business conditions, Caterpillar Inc., the world's largest maker of mining and construction equipment, disclosed nearly 20,000 job cuts, most of which already have been made. They include 5,000 new layoffs of white collar workers, which will occur globally by the end of March.
Earlier actions included the elimination of 2,500 Caterpillar workers through a buyout offer announced in December, the termination of about 8,000 contract and temp agency workers, and the reduction of 4,000 full-time factory workers through firings and buyouts.
Texas Instruments Inc., which makes chips for cell phones and other gadgets, will cut 3,400 jobs due to slumping demand. The Dallas-based company said Monday it will slash 12 percent of its work force _ 1,800 jobs through layoffs and another 1,600 through voluntary retirements and departures. And Brooks Automation Inc. said it plans to get rid of 350 jobs, or 20 percent of its work force. It will be the second round of cuts for Brooks, which makes software and equipment for chip manufacturers.
Oilfield services provider Halliburton Co. said it will eliminate jobs in markets particularly hard hit by the recession, though it didn't provide details. Its larger rival Schlumberger Ltd. said last week it will cut up to 5,000 jobs worldwide in the first half of 2009 and consider further reductions this spring.
The flurry of layoffs comes on the heels of similar action by big-name companies just last week.
Microsoft Corp. said it will slash up to 5,000 jobs over the next 18 months. Intel Corp. said it will cut up to 6,000 manufacturing jobs. And United Airlines parent UAL Corp. said it would get rid of 1,000 jobs, on top of 1,500 axed late last year.
And there's no end in sight. In a survey by the National Association for Business Economics, 39 percent of forecasters predicted job reductions through attrition or "significant" layoffs over the next six months, up from 32 percent in the previous survey in October. Around 45 percent in the current survey anticipated no change in hiring plans. About 17 percent thought hiring would increase.
A new report by the placement firm Challenger, Gray & Christmas found that companies are often turning to a creative combination of measures to cut costs _ beyond layoffs. Those measures include pay freezes or reductions, forced vacations, travel cutbacks and the elimination of year-end bonuses.
"Many companies cannot cut their payrolls as deeply as they have in previous downturns, simply because they did not do as much hiring during the most recent expansion," said John Challenger, president of the firm. "As a result, they are forced to find alternative ways to keep costs down."
Not all the economic news was as grim Monday. Sales of previously owned homes and a separate barometer of economic activity each logged unexpected gains in December. But economists didn't view them as signs of improvement.
"Keep the party hats in boxes and the Champagne in the cellar," said Bernard Baumohl, chief global economist at the Economic Outlook Group. "It's one month's set of data and they tell us little about the future."
Economists said the uptick in home sales was due to sinking prices spurring buyers. In the other report, a government-influenced balloon in the nation's money supply largely affected the outcome.
Wall Street closed moderately higher. The Dow Jones industrials rose 38.47,or 0.48 percent, to 8,116.03, after briefly moving into negative territory.
The National Association of Realtors said sales of existing homes rose 6.5 percent to an annual rate of 4.74 million last month. Buyers took advantage of dramatically lower prices, especially in distressed states like California, Florida and Nevada, where foreclosures are soaring.
The nationwide median sales price sank to $175,400, down 15.3 percent from a year ago. That marked the biggest annual drop on records going back to 1968. The median is the middle point, where half the homes sell for more and half for less.
For all of last year, existing-home sales totaled 4.9 million, down more than 13 percent from the previous year, and the lowest since 1997.
Meanwhile, the Conference Board's monthly forecast of economic activity rose 0.3 percent in December. But that pickup was influenced mainly by federal efforts to ease the credit crisis, which caused the supply of money to expand. If the jump in the money supply were excluded, the board's index would have dropped sharply, economists said.
The national economy, meanwhile, is continuing to backslide.
Many analysts predict the economy will have contracted at a pace of 5.4 percent in the fourth quarter when the government releases that report Friday. If they are correct, that would mark the worst performance since a 6.4 percent drop in the first quarter of 1982. The economy is still contracting now _ at a pace of around 4 percent, according to some projections.
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AP Business Writers Ellen Simon and Alan Zibel contributed to this report.
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JEANNINE AVERSA | January 26, 2009 10:13 PM EST |
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