Layoff Plans Soar
Weak jobs beget weak consumer spending and a weakening GDP. Weak spending begets weak hiring.
According to Challenger, Layoff plans jump 44% to 70,672.
Job reduction announcements by major U.S. corporations soared by 44% to 70,672 in April after falling to an eight-month low in March, according to a monthly report released Wednesday by outplacement firm Challenger Gray & Christmas.
Layoff plans were up 18% compared with April 2006. It's the first time since September that layoffs rose on a year-over-year comparison.
The job cuts in April were led by Citigroup (C) which announced plans to eliminate 17,000 positions. With 33,789 reductions in April, the financial sector has now announced plans to cut 50,221 jobs so far this year, overtaking the auto industry as the top job reducer.
In April, the top industries for job reductions were financial with 33,789, government with 5,643, autos with 4,089, industrial goods with 3,968 and consumer products with 3,391.
In a separate report, a survey of worker confidence showed employees growing slightly more uncomfortable about their personal finances. The Hudson employment index, based on interviews with 9,000 workers, fell to 107.5 in April from 109 in March. Workers were also more dissatisfied with their jobs.
ADP Estimates 64,000 Private Sector Jobs for April
The official numbers are out on Friday but ADP is reporting now U.S. job growth weakest in nearly four years.
U.S. private-sector jobs increased by 64,000 in April, the weakest job growth in nearly four years, according to the monthly ADP employment report released Wednesday.
"This is a sluggish type of number," said Joel Prakken, chairman of Macroeconomics Advisers LLC, which produces the report for Automatic Data Processing Inc. After adding in some 24,000 government jobs created in a typical month, the ADP report suggests nonfarm payrolls grew by about 90,000 in April, a bit lower than the 100,000 estimated by economists surveyed by MarketWatch.
Service-sector firms added about 106,000 jobs, while the goods-producing industries cut 42,000, including 20,000 in manufacturing. Goods-producing industries include manufacturing, mining and construction.
The 22,000 jobs lost in goods-producing industries excluding manufacturing (mostly construction) are the largest since November 2001.
The ADP report shows a decline of 45,000 construction jobs in the past three months, in contrast to the Labor Department's figures showing a gain of 29,000. Prakken said he wouldn't be surprised if the government numbers are revised lower to match his.
In April, small businesses created 45,000 jobs, medium-sized firms created 29,000 and large businesses shed 10,000 jobs, according to ADP. Large companies haven't added to their payrolls since November.
The ADP report is designed to mirror the monthly nonfarm payrolls report released by the Labor Department on Friday. One difference: the Labor Department statistics include government jobs, but ADP doesn't.
The April release marks the one-year anniversary of the ADP's public rollout. After a few big misses compared with the Labor Department figures in its first few months, the methodology for the ADP report has been tweaked and the sample size increased.
ADP's numbers at least make sense. Perhaps those methodology revisions helped. With housing as poor as it has been and capital spending declining, it is far more likely that the U.S. lost 45,000 construction jobs in the past three months as ADP estimates than added 29,000 construction jobs as the Labor Department's figures show.
IBM (IBM) Announces Job Cuts
IBM hopped on the bandwagon announcing a cut of 1,315 US jobs.
The world's largest technology services company, is cutting 1,315 services-related jobs in the United States, a union trying to organize IBM workers said on Tuesday.
"We're putting in place a series of actions to address our U.S. cost base, including a basic focus on resource and cost management disciplines and rebalancing of resources as we execute our global resource strategy," Chief Financial Officer Mark Loughridge said on a conference call with analysts on April 17, according to a transcript of the call.
Loughridge said in April that IBM's first quarter was "noticeably weaker" in the United States, especially in the industrial, financial services and communications industries.
The job cuts follow an IBM announcement on Monday that it planned to hire 500 people at a new customer call center in Daleville, Indiana, through 2010.
Clothing retailer Gap Inc. is considering sizable layoffs over the next few weeks to cut costs, the New York Post reported on Wednesday, citing three people familiar with the situation.
The job cuts would occur at all levels of the company, which employs 150,000 people, as its seeks to eliminate a stifling bureaucracy, the paper said.
Pending Home Sales at Three Year Low
U.S. pending home sales fell 4.9% in March and the Realtors' market-activity index hit a three-year low.
The group's pending-home-sales index declined 10.5% from March 2006 and sits at its lowest level since March 2003.
David Lereah, the NAR's chief economist, predicted that home sales will be "relatively sluggish" in the second quarter but that a "modest uptrend" is on the horizon for the second half of 2007.
"Although the weather improved in March, we're starting to see the effects of a decline in subprime lending and tighter lending standards," Lereah said in a news release.
Ian Shepherdson of High Frequency Economics said the drop was a big surprise.
"This is much worse than we expected," Shepherdson said in an e-mail. "The warm March weather ought to have persuaded more people to go house-hunting, and that in turn ought to have increased the number of contract signings, which is what the pending-sales index measures."
Are corporations are finally getting the message that housing is not going to recover? It seems like it. Capital spending has been falling like a rock and now we are seeing year over year increases in mass layoff plans.
Weak jobs beget weak consumer spending and a weakening GDP. Weak spending begets weak hiring. The cycle down is just starting and the falloff in capital spending in the face of a continued decline in housing seals the fate. Once again Lereah is on the wrong side of the fence predicting a "modest uptrend" in housing for the second half of 2007. With the debt side of the balance sheet sitting where it is, it is likely that consumers have never been less prepared for the recession that is about ready to hit them smack in the face.
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