Steep Job Cutbacks Add To Bleak Economic Picture
Friday, December 5, 2008
Need more proof that the recession is real? An onslaught of grim unemployment and layoff reports yesterday should dispel any lingering doubts.
Two of the nation's most stalwart blue-chip corporations, telecommunications giant AT&T and the DuPont chemical company, announced they would cut a combined 14,500 employees as demand from customers slows and the economic crisis worsens.
Those announcements were echoed by a broad range of companies, from software maker Adobe to publishing house Houghton Mifflin and entertainment giant NBC Universal, which together announced more than 1,100 layoffs, as estimates for total layoffs this year surpassed 1.05 million jobs, according to jobs placement firm Challenger, Gray & Christmas.
The Labor Department yesterday released data that confirmed the recession's tightening grip on U.S. households as 4.1 million people collected unemployment benefits in the week ended Nov. 22, the highest level since December 1982.
"At this point, it looks like the recession is accelerating," said Robert MacIntosh, chief economist at Eaton Vance Management. "It's a negative spiral. If you can't grow your business, you don't need more employees, and there is that much less income and that much less spending."
The bleak reports came ahead of the Labor Department's release today of November unemployment data that are expected to show job losses in excess of 300,000. Layoff announcements show how the economic crisis, which began in the housing sector, spread through the economic chain to dampen consumer and manufacturing demand and lead companies even in the more stable industries, such as telecommunications and chemicals, to cut jobs.
AT&T, the nation's biggest phone service operator, with wireless, broadband Internet and paid television services, is considered by many telecom analysts as the most secure firm in the industry because of its large cash holdings and growing wireless subscriber base. The sector is considered relatively steady because it offers services that many consumers view as necessities, akin to electricity or transportation. And it hasn't been hit by the credit crisis as strongly as the financial sector, according to Challenger, Gray & Christmas.
Still, AT&T said it would cut 12,000 jobs, or 4 percent of its workforce, and spend less on expanding its business next year than it did this year.
"We're at a point where everybody is looking for the bottom, but there's no way to know if it's really there," said John A. Challenger, chief executive of Challenger Gray & Christmas.
DuPont chief executive Charles O. Holliday Jr. blamed "a steep global decline" in construction and motor vehicle sales, along with slower consumer spending, for the company's decision to reduce earnings guidance and cut jobs. Sales volume was down 15 percent in October and November, the firm said.
As a result, DuPont, whose products go into things as varied as kitchen countertops and agricultural products, said it would cut 2,500 jobs from its workforce of 60,000 and cut capital spending by 10 to 20 percent.
"Many customers have dramatically curtailed production to draw down inventories," Holliday told analysts on a conference call. "We can't control the markets, but we can control our costs, working capital and expenditures."
December and January may hold even worse layoff news, Challenger said, as corporations typically scrutinize their annual budget and make decisions about payrolls for the following year during those months.
So far this year, 220,506 jobs have been cut in the financial services industry, 120,742 in the automotive sector and 63,838 in retail, Challenger said. The only sectors that have been immune to layoffs have been health care and energy.