Report Shows Job Losses Abating

A report released on Wednesday shows that the pace of U.S. job losses are abating, a sign that the economy may finally be stabilizing.
Report Shows Job Losses Abating
6/4/2009
Updated:
6/4/2009

NEW YORK—A report released on Wednesday shows that the pace of U.S. job losses are abating, a sign that the economy may finally be stabilizing.

U.S. outplacement firm Challenger, Gray & Christmas announced on Wednesday that 111,182 announced job cuts in May was 16 percent lower than that from April, which had 132,590 planned layoffs.

It was a fourth straight month of decline, and the planned layoffs from last month were the lowest total since September of 2008, when both Lehman Brothers and AIG collapsed.

Challenger’s report showed that job cuts among the governmental/not-for-profit sector were the hardest hit, at 22,317 layoffs last month. That’s the third month in a row that the governmental sector led the pack. The computer and technology industry were second, followed by the automotive industry.

Many states are finding it increasingly difficult to make ends meet as the U.S. recession sapped the profits of corporations and earnings of individual taxpayers, resulting in lower tax receipts. On top of lower tax receipts, many states must support tens of thousands of unemployed workers in paying out unemployment compensation.

Unemployment Worries

While the decline in jobs may be slowing, firings still far outpace hirings and analysts don’t expect firms to change that stance until we see signs of marked economic improvement.

The millions of unemployed Americans remain worrisome for lawmakers and economists, who believe that consumer spending is key to any economic recovery.

Early this week, New York City comptroller Bill Thompson said that the number of unemployed may hit 400,000 in the city before any upswing can be felt. “The worst economic downturn since the end of World War II is taking a heavy toll on the city’s economy,” Thompson said in a report.

The finance, insurance, and business services industries accounted for nearly 50 percent of all job cuts in New York City, which heavily relies on such industries for tax revenues.

In Florida, more than 250,000 unemployed Floridian workers will receive extended unemployment benefits as a result of a new bill signed by Gov. Charlie Crist on Tuesday. The extension is supported in part by $418 million from the federal government.

GM Not Done Yet

While news of GM’s bankruptcy sent the stock markets soaring on Monday, the trend could reverse if as expected, GM announces massive job cuts in the coming weeks.

The cuts are inevitable as a part of its restructuring plan. Assembly plants must close and the company must cut costs and start anew to compete in the new global auto industry. President Obama’s promotion of a “leaner, meaner” GM ignores the elephant in the room—the steps that must be taken to create a “leaner” GM.

The Center for Automotive Research said that as many as 1.3 million jobs could be wiped out as a result of GM and Chrysler’s bankruptcies. Most are due to plant closings, but many layoffs of white collar employees are also expected.

GM CEO Fritz Henderson said this week that GM plans to eliminate 10,000 white collar workers, close multiple plants, and cut ties with 2,300 dealerships. Closure of those dealerships will amount to even more job losses, indirectly attributable to GM.

Investors have jumped back into the stock market recently due to reports of declining new jobless applications, but such a trend could quickly reverse when the GM announcements come out and the closed dealerships take their toll on local economies.