Published On: Thu, May 3rd, 2012

Job Cuts Rise Slightly in April

By: Challenger, Gray & Christmas, Inc.

CHICAGO, May 3, 2012 – The pace of downsizing remained virtually unchanged in April, as U.S.-based employers announced planned job cuts totaling 40,559 during the month.  That is a 7.1 percent increase from 37,880 job cuts announced in March, according to the latest job-cut report released Thursday by global outplacement firm Challenger, Gray & Christmas, Inc.

April job cuts were up 11.2 percent from the same month a year ago, when employers announced 36,490 planned cuts, the lowest monthly total recorded in 2011.

So far this year, employers have announced 183,653 job cuts, 9.8 percent more than the 167,239 job cuts by this point in 2011.  Despite the year-over year increase, the monthly average of 45,913 through the first four months of the year is below the 12-month average of 50,507 in 2011.

Last month’s job cuts were led by the education sector, where school districts continue to be under pressure to cut costs amid massive state and local budget deficits.  Last month, a total of 9,027 planned cuts were announced by educational institutions across the country.  That was up 142 percent from 3,733 education job cuts in March.

If there is any silver lining in the latest data on education job cuts, it is that despite the April surge, the pace of downsizing in the sector is down 32 percent from a year ago.  This year, education job cuts total 14,710, compared to 21,505 at this point a year ago.

Meanwhile, the broader government sector is also experiencing a decline in job cuts.  While planned cuts increased to 3,100 in April, making it the second largest job cutter of the month, the 8,850 job cuts announced by government agencies year-to-date is 83 percent lower than the 52,660 job cuts announced in the first four months of 2011.

For the year, consumer products firms are the leading job cutters, having announced 20,134 planned job cuts through April, 257 percent more than the 5,632 cuts announced by this point a year ago.  However, the bulk of the cuts (13,856) occurred in February and has since fallen dramatically.  Last month, consumer products firms announced just 1,696 job cuts.

The transportation sector, which ranks third in year-to-date job cuts behind retail, has also seen a dramatic increase in downsizing.  Job cuts in the sector totaled 18,774 as of April, up 417 percent from 3,630 in 2011.  Again, the bulk of the cuts (14,065) occurred in February.

“There have been some concerns that the economy may be headed for a repeat of last year’s spring and summer slowdown.  While job gains may indeed hit a lull in the coming months, we do not foresee a sudden upsurge in downsizing activity.  Even with the increased job cuts in consumer products, retail and transportation, the monthly totals remain well below levels that would signal a reversal in the recovery,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

Since the beginning of 2010, the pace of downsizing has remained relatively low and stable, averaging just over 47,000 per month, compared to more than 104,000 per month in 2008 and 2009.

“Job creation, while in positive territory for 25 consecutive months, has definitely ebbed and flowed.  Even at its best, job creation is falling well short of what is needed to make a substantial dent in unemployment.  While some would like to attribute the lack of hiring to uncertainty and regulatory roadblocks, the fact is that demand for goods and services simply has not reached a level that warrants accelerated hiring,” said Challenger.

“Federal, state and local governments are still in cost-cutting mode. Consumer spending, which is driven largely by home buying, remains soft.  The third leg of the economy — business spending — is starting to improve as companies spend more on new technology and other equipment, but it’s not nearly enough to make up for the shortfalls in consumer and government spending and drive the economy forward.

“Making matters worse is the fact that the global economy also remains weakened, Europe in particular.  Even China is suffering, with the latest report showing that the country’s manufacturing sector just turned in its sixth consecutive month of contraction,” he noted.

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