Little relief in sight as layoffs mount
Posted February 3, 2009 3:44 p.m. EST
Updated February 3, 2009 5:39 p.m. EST
WASHINGTON — Layoffs are spiking as the recession rips through the country, with retailers, banks, factories and others cutting costs ever deeper this week. It's inflicting a painful toll on workers, and there's little relief in sight.
The latest round of pink slips and cost-cutting measures came Tuesday on the heels of tens of thousands of layoffs ordered by a slew of companies last week alone.
PNC Financial Services Group said it plans to cut 5,800 jobs. Airplane maker Hawker Beechcraft Corp. said 2,300 employees will lose their jobs before the end of the year and warned more layoffs may be coming. Liz Claiborne Inc., will eliminate 725 jobs, or 8 percent of its work force, one day after Macy's Inc. said it was axing 7,000 jobs, or 4 percent of its work force. King Pharmaceuticals Inc., will get rid of 520 jobs.
Military contractor and aerospace company Rockwell Collins Inc. is cutting 600 jobs and freezing salaries at last year's level for all executives and managers. UPS Inc. is freezing management pay and is suspending its matching contributions to employees' 401(k) plans. And General Motors Corp. said it will offer buyouts to all of its hourly workers.
In the Triangle, Fidelity Investments began a second phase of layoffs at its Durham operations. A company spokesman said 1,700 jobs are being shed overall, but he couldn't provide an exact number of local jobs affected.
Fidelity cut 1,300 jobs across the company in November.
Also, Youngsville-based Xerium Technologies, which makes equipment for paper production, announced it would lay off 230 people worldwide, including some locally, by the end of next month. The company cut 100 jobs last year.
With jobs vanishing at a breakneck pace, it's becoming increasingly difficult for the unemployed to find new jobs. And some of those who still have jobs are rapidly losing ground in other ways. Employers are freezing or cutting pay, trimming hours, suspending matching contributions to 401(k)s and doing away with health care, bonuses or perks that were offered during better economic times.
"Businesses are slashing jobs in order to survive in the deepening economic downturn," said Mark Zandi, chief economist at Moody's Economy.com.
All told, economists, on average, estimate that at least 524,000 more jobs vanished in January alone, and some think the figure will total around 700,000. The unemployment rate - now at 7.2 percent - is expected to jump to 7.5 percent, a 17-year peak, in January when the government releases new figures Friday.
In this job-killing recession, all workers - blue collar, white collar, those with advanced degrees and those with high-school diplomas - are feeling the pain. Rising unemployment is sparing no state or corner of the country.
Jobless rates were higher in a staggering 364 of the nation's 369 metropolitan areas in November compared with a year earlier. And a new report from the Labor Department due out Wednesday is likely to show equally grim results.
"A lot of people are realizing that once you lose your job, your expectation for being unemployed for a longer period of time is higher," said John Silvia, chief economist at Wachovia Corp. "That really adds to the tension in the marketplace and the degree of frustration among the unemployed."
The average time it took an unemployed person to find a job - full time, part time or otherwise - in December was 19.7 weeks, up sharply from 18.9 weeks in November, according to Labor Department figures.
Meanwhile, the number of "long-term" unemployed - those out of work for 27 weeks or more - jumped to 2.6 million in December, up from 2.2 million in November.
To help revive the economy and jump-start job creation, President Barack Obama is pushing Congress to enact a stimulus package of increased government spending, including on big public works projects as well as tax cuts. The House passed an $819 billion package; the Senate is working on an $885 billion plan.
Obama says his plan will save or create more than 3 million jobs over the next "few" years.
The Federal Reserve announced Tuesday that it is extending the life of key programs intended to relieve the credit and financial problems that have aggravated the recession. It will keep these programs, which had been slated to expire on April 30, running through the end of October.
The programs being extended include those that: provide emergency loans to investment firms; buy mounds of companies' short-term debt, known as "commercial paper;" bolster the mutual fund industry; and allow investment firms to temporarily swap risky securities for super-safe Treasury securities.
On Wall Street, investors set aside angst on the economy and took comfort in a rare uptick in housing activity. The Dow Jones industrials rose nearly 142 points, or about 1.8 percent, to 8,078.36.
Looking ahead, economists predict up to 3 million jobs will disappear this year even if Congress quickly approves the stimulus package. The country lost a net total of 2.6 million jobs last year, the most since 1945, though the labor force has grown significantly since then.
The unemployment rate could hit 10 percent or higher later this year or early next year, under some analysts' projections.
Companies are slashing jobs and cutting costs because the steepening economic tailspin in the U.S. and overseas is sapping customer demand. Americans throttled back spending at the end of last year, thrusting the economy into its worst backslide in a quarter-century.
Another illustration of the collapse of big-ticket purchases came Tuesday with the release of monthly auto sales data that set a somber tone for the rest of the year.
U.S. auto sales at Chrysler plunged 55 percent in January, GM's sales tumbled 49 percent and Ford's dropped 40 percent, while Japanese rival Toyota's sales fell 32 percent and Honda's slid 28 percent. Subaru bucked the trend for a second straight month, posting an 8 percent sales increase, but the industry overall was on track for its fourth straight month in which U.S. sales slid 30 percent or more.
Many economists predict the current January-March quarter will be the worst of the recession, now in its second year. They predict the economy will shrink at a staggering rate of 5 percent or more as consumers and businesses hunker down further under the force of the worst housing, credit and financial crises to slam the nation since the 1930s.
Even under the best-case scenario, with the recession ending in the fall, the situation will be rocky. The economy is expected to remain quite weak this year and into 2010. Businesses will be in no mood to ramp up hiring or capital spending until they feel confident that any recovery will be lasting.
Meanwhile, a rush to buy foreclosed - and deeply discounted - properties is prompting more house hunters to sign contracts.
The National Association of Realtors' index of pending sales for previously owned homes rose 6.3 percent in December to 87.7. While that's a welcome dose of good news for the depressed housing market, home prices are expected to keep falling through 2009, another negative force that is likely to keep consumers in hibernation.