Layoff announcements bounce back in August

Challenger: Job reduction plans down 24% year-to-date

By Rex Nutting, MarketWatch

Last Update: 4:34 PM ET Sep 5, 2006

WASHINGTON (MarketWatch) -- Announcements of job reductions at major U.S. employers rose by 76% in August, bouncing back to the average level for the year, according to an unscientific monthly survey conducted by Challenger Gray & Christmas released Tuesday.

Job-cut announcements rose to 65,278 in August from a six-year low of 37,178 in July, "in what may signal an early start to year-end downsizing," Challenger said. Announcements totaled
67,176 in June and have averaged 67,375 this year.

The figures are not seasonally adjusted. Layoff announcements typically fall in the summer months when bosses go on vacation.

The report does "not point to a weakening in the labor market," said John Ryding, chief U.S. economist for Bear Stearns.

The report comes four days after the Labor Department reported that nonfarm payrolls grew by 128,000 in August, while the unemployment rate ticked lower to 4.7%. Government data show a softer pace of hiring in the past five months, while first-time claims for jobless benefits have ticked slightly higher in recent weeks.

So far in 2006, employers have announced 538,914 job cuts, 24% percent fewer than this time last year, Challenger said. Annual job cuts are on pace to finish below 1 million for the first time since 2000.

In August, computer companies led the way with 17,371 job cuts. The auto industry announced 7,639 reductions, bringing the annual total to 77,897.

The woes in the computer industry continued in Septmber. Chip giant Intel announced Tuesday it would eliminate 10,500 jobs, about 10% of its workforce. See full story.

"There are some signs that the housing slowdown is taking a toll on jobs," said the firm's CEO, John Challenger. "Job cutting in real estate this year is nearly double last year's pace." But job cutting in other housing-related sectors, such as finance or consumer durable goods, has not risen, he said.

"The housing slowdown has not had a major impact on the job market, yet," said Challenger.

The Challenger report covers only a tiny fraction of those who lose their jobs each month.

In June, for instance, a total of 1.51 million workers were discharged from their jobs involuntarily, according to the latest data from the Labor Department.

The layoff announcements tracked by Challenger could take place immediately or over time.

The reductions could be accomplished by voluntary means such as retirements or workers leaving for other jobs. They could be offset by hiring in other divisions of a company.

Rex Nutting is Washington bureau chief of MarketWatch.