Thursday, July 21, 2011

A New Surge In American Job Layoffs

As Congress and the President wrangle over who will pay for the New Austerity—guess who!—and Larry Summers seeks a guarantee that no big financial institution in any country should be allowed to fail, the Real Economy is suffering through a new surge of layoffs. The Wall Street Journal tells the story in Layoffs Deepen Gloom.

Layoffs_unwelcome_uptick Companies are laying off employees at a level not seen in nearly a year, hobbling the job market and intensifying fears about the pace of the economic recovery.

Cisco Systems Inc., Lockheed Martin Corp. and troubled bookstore chain Borders Group Inc. are among those that have recently announced hefty cuts, while recent government numbers underscore how companies have shifted toward cutting jobs.

The increase in layoffs is a key reason why the U.S. recorded an average of only 21,500 new jobs over the past two months, far below the level needed to bring down unemployment, which now stands at 9.2%.

The cuts also reflect the shifting outlook of employers, many of whom had expected the economy to gain speed as the year progressed. Instead, growth has faltered. If the pace continues to disappoint, more companies will feel pressure to pull back. "Layoffs have played a big role [in weak job growth] over the last few months," said Mike Montgomery, an economist at IHS Global Insight. "The soft patch is more layoffs and nothing else to pick up the slack."

In May, U.S. public and private employers shed 1.78 million workers, the highest level since August 2010. Among those layoffs, 1.66 million were from the private sector [graph above].
Other data indicate that employers are cutting more jobs. The government's most recent comprehensive jobs report, released in early July, showed the number of people out of work for less than five weeks—a figure many economists use as a proxy for layoffs, since it tallies those recently let go—grew 15.5% from May to June to a total of 3.1 million. (more)