62,000 Jobs Are Cut by U.S. and Foreign Companies
By JACK HEALY
Published: January 26, 2009
Employers have tried to nip and tuck their labor costs by reducing overtime, shortening the workweek and freezing wages, but now, they are reaching for the saw.
On Monday alone, companies across the employment spectrum announced more than 65,000 job cuts in the United States and around the world, a stark sign that businesses are enduring a painful, protracted downturn.
Monday’s toll included 20,000 cuts at Caterpillar, the world’s largest maker of construction and mining machinery; 8,000 jobs at the wireless provider Sprint Nextel; 7,000 workers at Home Depot, and 8,000 from the expected merger of the pharmaceutical makers Pfizer and Wyeth. The beleaguered automaker General Motors announced that it would cut shifts at plants in Michigan and Ohio, where the downturn has hit hardest, eliminating some 2,000 jobs.
And Texas Instruments said after the market closed on Monday that it would cut 3,400 jobs or 12 percent of its work force through 1,800 layoffs and 1,600 buyouts or retirements.
In Europe, the banking and insurance group ING said it would cut 7,000 jobs; the electronics company Philips, 6,000; and the steel maker Corus, 3,500 worldwide.
“We’re now into the danger zone,” said Brian Bethune, chief United States financial economist at IHS Global Insight. “It really becomes pernicious because the uncertainty increases, corporate confidence is badly battered, and you get these severe measures being taken.”
President Obama cited the layoff announcements in remarks Monday morning as he urged action on an $825 billion economic stimulus package of tax cuts, emergency benefits and public spending projects.
“These are not just numbers on a page,” Mr. Obama said. “As with the millions of jobs lost in 2008, these are working men and women whose families have been disrupted and whose dreams have been put on hold. We owe it to each of them and to every single American to act with a sense of urgency and common purpose. We can’t afford distractions and we cannot afford delays.”
The United States economy has dropped some 2.59 million jobs since the recession began in December 2007, and unemployment rose to 7.2 percent last month. Economists worry that the economy could now be losing as many as 600,000 jobs a month, and they said Monday’s layoff announcements served to underline the stricken state of the labor market.
Last week, the government reported that first-time unemployment claims had risen to 589,000 for the week ending Jan. 17, tying a record high set in December.
The latest job cuts — and the additional announcements likely to come in a cascading pattern as job losses through the economy cause demand to shrink further and thus lead to more layoffs mean more pain for states, as unemployment insurance claims rise and deplete state coffers.
The Obama administration has proposed setting aside $43 billion to help blunt the problem and provide for new recipients of unemployment insurance and existing ones. That money is intended to raise the weekly benefits, to extend how long people can collect those payments and to cover more types of workers, like part-timers. It is largely based upon an estimate that the unemployment rate will peak at 8.3 percent in 2010. But if unemployment reaches the double-digits, as some economists expect, the funding will almost certainly not be enough, economists say.
“The economy is deteriorating at a faster clip than even the most dreary forecasts had expected,” said the economist Joseph Brusuelas. “At the current trend, $43 billion will not be sufficient, should we breach 9 percent unemployment and maybe reach into the double digits.”
Monday’s announcements only added to a grim parade of job cuts from Wall Street to wireless providers to computer companies to retail stores.
Last week,Microsoft announced it would cut 5,000 jobs over the next year and a half; Sony in Japan and Ericcson in Sweden each announced 5,000 layoffs; and the motorcycle maker Harley-Davidson said it was eliminating 1,000 jobs. Carmakers in Japan, South Korea and Europe have also cut jobs in recent months as did the cellphone maker Nokia.
“It steepens the whole downturn,” said Harry Holzer, a labor economist at Georgetown University and the Urban Institute. “The magnitude of these layoffs indicates that the downturn in the labor markets seems to be accelerating.”
“This is a big deal,” said Dean Baker, a director of the Center for Economic and Policy Research. “We’re losing jobs at an incredibly rapid rate, and even with that, I’m worried they’re accelerating. We’re seeing a much more rapid rate of layoff announcements.”
Caterpillar, which has been hurt by falling orders for construction and mining machinery, said Monday morning that it would cull 20,000 workers through layoffs and buyouts. It said it would make “sharp declines” in overtime and eliminate scores of temporary and contract jobs.
The company said 2009 would be one of its weakest years since World War II.
“These are very uncertain times,” the chief executive, James W. Owens, said in a statement. “While it’s painful for our employees and suppliers, it’s absolutely necessary given economic circumstances. We expect to have most of the actions needed to lower employment and cost levels in place by the end of the first quarter.”
“We were whipsawed in the fourth quarter as key industries were hit by a rapidly deteriorating global economy and plunging commodity prices,” Mr. Owens said.
The wireless provider, Sprint Nextel, said its 8,000 job cuts were part of a plan to trim labor costs by $1.2 billion, and said most of the cuts would be completed by March 31. About 850 of the job cuts are expected to come through buyouts, which will cost the company $300 million in severance costs and related expenses.
“Labor reductions are always the most difficult action to take, but many companies are finding it necessary in this environment," Sprint’s chief executive, Daniel R. Hesse, said.
Home Depot, the country’s largest home-supply chain, said it would cut 7,000 jobs, about 2 percent of its work force, and would close its higher-end Expo Design Center business, which includes 34 stores.
Carol B. Tomé, Home Depot’s chief financial officer, said in a telephone interview that the company began exploring ways to save its Expo business months ago, but “as we kept looking at alternatives the business kept getting softer and softer.”
With no sign of consumers cracking open their wallets anytime soon, executives simply realized, “we can’t fix it.”
Stephanie Rosenbloom and Catherine Rampell contributed reporting.
Published: January 26, 2009
Employers have tried to nip and tuck their labor costs by reducing overtime, shortening the workweek and freezing wages, but now, they are reaching for the saw.
On Monday alone, companies across the employment spectrum announced more than 65,000 job cuts in the United States and around the world, a stark sign that businesses are enduring a painful, protracted downturn.
Monday’s toll included 20,000 cuts at Caterpillar, the world’s largest maker of construction and mining machinery; 8,000 jobs at the wireless provider Sprint Nextel; 7,000 workers at Home Depot, and 8,000 from the expected merger of the pharmaceutical makers Pfizer and Wyeth. The beleaguered automaker General Motors announced that it would cut shifts at plants in Michigan and Ohio, where the downturn has hit hardest, eliminating some 2,000 jobs.
And Texas Instruments said after the market closed on Monday that it would cut 3,400 jobs or 12 percent of its work force through 1,800 layoffs and 1,600 buyouts or retirements.
In Europe, the banking and insurance group ING said it would cut 7,000 jobs; the electronics company Philips, 6,000; and the steel maker Corus, 3,500 worldwide.
“We’re now into the danger zone,” said Brian Bethune, chief United States financial economist at IHS Global Insight. “It really becomes pernicious because the uncertainty increases, corporate confidence is badly battered, and you get these severe measures being taken.”
President Obama cited the layoff announcements in remarks Monday morning as he urged action on an $825 billion economic stimulus package of tax cuts, emergency benefits and public spending projects.
“These are not just numbers on a page,” Mr. Obama said. “As with the millions of jobs lost in 2008, these are working men and women whose families have been disrupted and whose dreams have been put on hold. We owe it to each of them and to every single American to act with a sense of urgency and common purpose. We can’t afford distractions and we cannot afford delays.”
The United States economy has dropped some 2.59 million jobs since the recession began in December 2007, and unemployment rose to 7.2 percent last month. Economists worry that the economy could now be losing as many as 600,000 jobs a month, and they said Monday’s layoff announcements served to underline the stricken state of the labor market.
Last week, the government reported that first-time unemployment claims had risen to 589,000 for the week ending Jan. 17, tying a record high set in December.
The latest job cuts — and the additional announcements likely to come in a cascading pattern as job losses through the economy cause demand to shrink further and thus lead to more layoffs mean more pain for states, as unemployment insurance claims rise and deplete state coffers.
The Obama administration has proposed setting aside $43 billion to help blunt the problem and provide for new recipients of unemployment insurance and existing ones. That money is intended to raise the weekly benefits, to extend how long people can collect those payments and to cover more types of workers, like part-timers. It is largely based upon an estimate that the unemployment rate will peak at 8.3 percent in 2010. But if unemployment reaches the double-digits, as some economists expect, the funding will almost certainly not be enough, economists say.
“The economy is deteriorating at a faster clip than even the most dreary forecasts had expected,” said the economist Joseph Brusuelas. “At the current trend, $43 billion will not be sufficient, should we breach 9 percent unemployment and maybe reach into the double digits.”
Monday’s announcements only added to a grim parade of job cuts from Wall Street to wireless providers to computer companies to retail stores.
Last week,Microsoft announced it would cut 5,000 jobs over the next year and a half; Sony in Japan and Ericcson in Sweden each announced 5,000 layoffs; and the motorcycle maker Harley-Davidson said it was eliminating 1,000 jobs. Carmakers in Japan, South Korea and Europe have also cut jobs in recent months as did the cellphone maker Nokia.
“It steepens the whole downturn,” said Harry Holzer, a labor economist at Georgetown University and the Urban Institute. “The magnitude of these layoffs indicates that the downturn in the labor markets seems to be accelerating.”
“This is a big deal,” said Dean Baker, a director of the Center for Economic and Policy Research. “We’re losing jobs at an incredibly rapid rate, and even with that, I’m worried they’re accelerating. We’re seeing a much more rapid rate of layoff announcements.”
Caterpillar, which has been hurt by falling orders for construction and mining machinery, said Monday morning that it would cull 20,000 workers through layoffs and buyouts. It said it would make “sharp declines” in overtime and eliminate scores of temporary and contract jobs.
The company said 2009 would be one of its weakest years since World War II.
“These are very uncertain times,” the chief executive, James W. Owens, said in a statement. “While it’s painful for our employees and suppliers, it’s absolutely necessary given economic circumstances. We expect to have most of the actions needed to lower employment and cost levels in place by the end of the first quarter.”
“We were whipsawed in the fourth quarter as key industries were hit by a rapidly deteriorating global economy and plunging commodity prices,” Mr. Owens said.
The wireless provider, Sprint Nextel, said its 8,000 job cuts were part of a plan to trim labor costs by $1.2 billion, and said most of the cuts would be completed by March 31. About 850 of the job cuts are expected to come through buyouts, which will cost the company $300 million in severance costs and related expenses.
“Labor reductions are always the most difficult action to take, but many companies are finding it necessary in this environment," Sprint’s chief executive, Daniel R. Hesse, said.
Home Depot, the country’s largest home-supply chain, said it would cut 7,000 jobs, about 2 percent of its work force, and would close its higher-end Expo Design Center business, which includes 34 stores.
Carol B. Tomé, Home Depot’s chief financial officer, said in a telephone interview that the company began exploring ways to save its Expo business months ago, but “as we kept looking at alternatives the business kept getting softer and softer.”
With no sign of consumers cracking open their wallets anytime soon, executives simply realized, “we can’t fix it.”
Stephanie Rosenbloom and Catherine Rampell contributed reporting.
Labels: Caterpillar, Corus, Ericsson, GM, Harley Davidson, Home Depot, ING, layoffs, Microsoft, SONY, Sprint Nextel, Texas Instruments
<< Home