US Jobs Are Pink-Slipping Away
Layoffs soar as once-hot US economy cools. Still, overall unemployment is expected to creep - not leap - upward.
NEW YORK — In a sign that the United States economy is losing steam, corporations are beginning to shed workers by the thousands.
Lower earnings, a flood of imports from Asia, and turmoil in the stock markets are partially to blame. And there are also signs that consumer confidence - which has been strong - is starting to weaken.
According to Challenger, Gray, and Christmas, a Chicago outplacement firm, for the first eight months of 1998 layoffs are up 37 percent from last year and are at the highest level since 1994. And job creation - the new jobs needed to offset layoffs - is at its lowest level in nearly three years.
"Layoffs are soaring right now," says John Challenger, chairman of the company.
The layoffs have yet to send the nation's jobless rate soaring. Economists expect the rate will edge upward toward 5 percent in the months ahead. On Friday, the Labor Department said unemployment in September rose to 4.6 percent from 4.5 percent in August.
Mr. Challenger says the layoffs mark a shift in the US economy. Until now, companies have been loath to lay off workers. Even if they did not have the orders to justify their payroll, employers did not want to lose hard-to-find skilled workers.
Now, he says, companies have decided they no longer can carry the overhead.
"Their earnings are less than expected," Challenger says, "so they are taking action swiftly."
Among the companies who have recently announced layoffs are Case Corp., Pratt & Whitney, Varian Associates, and Gillette. In the future, Challenger expects the layoffs will spread to Wall Street, financial-service companies, farm-equipment manufacturers, and high-tech companies.
In the past, such layoffs did not make much of an impact on the economy as a whole because companies were creating many new jobs. But on Friday the Labor Department reported that manufacturing payrolls fell 16,000 and construction jobs dropped by 20,000.
"Basically, the global crisis has come home," says Bruce Steinberg, chief economist for Merrill Lynch & Co. in New York. "We're not going to be as comfortable as we have been in recent years."
Bright notes for consumers
Not all economists say that prospects are grim. Ken Goldstein, a labor economist at the Conference Board, a business-research organization, says the employment picture still looks good to him. The level of employment ads, as tracked by the Conference Board's Help-Wanted Index, remains high. He also cites the relatively few new claims for unemployment. Initial unemployment claims are at their lowest levels since February 1989.
"The reason we have not had the labor market dry up is we have had a strong consumer market all year long," Mr. Goldstein says.
The consumer, he adds, is getting an income boost because of cheap oil prices and falling interest rates. Last week, the Federal Reserve lowered interest rates by 0.25 of a percentage point.
But some signs are emerging that consumer spending is starting to fade. In a survey issued yesterday, the University of Michigan reports consumer confidence slid in September to its lowest level in 18 months.
The survey also found that although consumer confidence is still favorable, there is an underlying apprehension increasingly based on economic turmoil overseas.
Many of the recent job cuts are in industries that count on exports. In Orange County, Calif., Motorola says it will lay off 500 workers when it closes a semiconductor factory in Irvine, Calif., later this year. Last month, another California manufacturer, Rockwell International Corp. based in Seal Beach, said it plans to let go 800 employees in Newport Beach, Calif., and spin off its semiconductor division.
The layoffs have spread to the export-sensitive aerospace sector as well. Seattle-based Boeing Co. has announced it will slice 7,800 positions.
And last month Pratt & Whitney, based in East Hartford, Conn., announced a 1,000-job reduction. One of the reasons for the cuts, says the company, is a slowdown in new orders from Asian airlines.
The turmoil in Russia is also resulting in some layoffs. Case Corp., based in Racine, Wis., announced last month it was laying off 1,000 employees - mostly salaried workers - in its East Moline, Ill., plant and in Hamilton, Ontario. The agricultural-equipment producer says it expects lower demand because of deteriorating conditions in its major markets, including Eastern Europe and the Commonwealth of Independent States, which includes Russia.
Mergers play a role
Not all the job losses are the result of the global slowdown. Citicorp and Travelers Group expect to pare some workers as a result of their merger, which is effective Thursday. CNBC has reported that the new company, called Citigroup, will lay off as many as 8,000 employees. Jack Morris, a spokesman for the company, did not deny the figure but says Citigroup does not have a particular target. "Obviously, there is some overlap" in jobs, he says.
For many workers, the pink slips come as a surprise. That was the case for Peter Audet, who has worked for Motorola in Plantation, Fla., for 26 years. Mr. Audet says he has already had a "pity party." He has decided to take a retirement package and look for other work.
But Audet says he's not bitter about the company's action, which eliminated his entire department.
"I wish them the best of luck," Audet says. "I realize they are in a battle for corporate survival."