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Job Cuts Rapidly Catching Up to 2006 Levels

June 06, 2007

Central Valley Business Times

Employers announced plans in May to eliminate 71,115 jobs, up 32 percent from May 2006 when job cuts totaled 53,716, according to a report Wednesday from the outplacement company Challenger, Gray & Christmas Inc.

May was the second consecutive month in which job cuts increased from the same period a year ago, according to Challenger.

The pace of job cutting remains below last year’s level, but the gap is rapidly closing. The 337,773 job cuts announced by employers so far this year are 8.5 percent lower than the 369,282 announced in the first five months of 2006.

At the end of the first quarter, 2007 job cuts were 23 percent lower than last year.

May job cuts were virtually unchanged (up 0.6 percent) from April when job cuts surged 44 percent from the previous month to 70,672.

Heavy downsizing in the computer industry dominated May job cuts. Providers of software, hardware and technology services eliminated 13,631 jobs in May, nearly double the 7,161 job cuts announced by the second-ranked automotive industry. May was the largest job-cut month for the computer industry since August 2006, when 17,371 cuts were announced.

The financial sector, which announced another 4,804 job cuts in May, is the leading job-cutting industry for the year. More than one-fifth (22 percent) of the 55,025 job cuts announced by the sector since January are related to continued weakness in the housing market and the collapse of the sub-prime lending market.

“Heavy job cutting in the computer industry reflects a slowdown in business spending on new technology. We may continue to see heavy cuts in the months ahead with spending expected to remain soft in the near future,” says John Challenger, chief executive officer of Challenger, Gray & Christmas.

A recent report by ChangeWave Research found that the percentage of companies planning to increase their spending has fallen to its lowest point in the last four years, dropping from 34 percent in November to 26 percent in May.

“We have also seen increases in job cutting among pharmaceutical, health care and media firms. However, the trends do not suggest that the economy or job market is headed for a meltdown,” says Mr. Challenger.

centralvalleybusinesstimes.com