Troubling signs

Nearly 60,000 layoffs rattle ailing U.S. economy, with warnings of more to come

January 27, 2009|By Hanah Cho | Hanah Cho,hanah.cho@baltsun.com

Another huge wave of layoffs hit workers yesterday, with major U.S. employers planning to cut almost 60,000 jobs across various industries in the latest sign of distress in the labor market.

Faced with falling profits, equipment maker Caterpillar Inc. said it's cutting 20,000 jobs, and Sprint Nextel Corp. plans to eliminate 8,000 jobs, mostly by the end of March. Home Depot Inc. said it will cut 7,000 jobs nationwide and close two of its design stores in Maryland. Other major employers announcing cuts yesterday included Texas Instruments and Pfizer.

The cuts affect workers and operations nationwide and add to a host of previously announced job losses at companies like Circuit City, General Motors and Hertz rental cars.

In Maryland, several private employers notified the state earlier this month of pending layoffs and closures that affect more than 600 workers, starting in March.

Economists warn of more job cuts amid a deepening recession that many expect to persist through 2009. The drumbeat of grim job news suggests employers across various industries are reacting to what will likely be a protracted slowdown in demand and sales, economists say.

The unemployment rate climbed to 7.2 percent last month.

"This recession, unfortunately, is an equal-opportunity recession," said Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh. "Everyone is feeling the pain."

In Maryland, 296,652 people filed new claims for unemployment benefits last year, up nearly 34 percent from 2007, according to Thomas Wendel, the executive director for the state's office of unemployment insurance. The state office of unemployment insurance has extended its hours to deal with the 60 percent increase in workload during the past 10 weeks compared with the corresponding period last year, he said.

Among yesterday's announcements, Home Depot Inc. said it is shutting down its higher-end Expo home-decoration business, closing 34 design stores nationwide by the end of April.

Pharmaceutical giant Pfizer Inc., which is buying competitor Wyeth, said it will reduce its combined work force by 15 percent, or 19,000 jobs, and close five factories.

Semiconductor maker Texas Instruments said it would reduce 12 percent, or 3,400 jobs, of its work force through layoffs and voluntary retirements.

Meanwhile, General Motors Corp. plans to slash about 2,000 jobs at two facilities in Ohio and Michigan, while cutting production at 13 other plants in the U.S. and Canada.

Earlier this month, the automaker said its Powertrain Baltimore Transmission Plant expects to temporarily lay off all 239 of its hourly workers for a week starting Feb. 23 because of reduced demand for the company's vehicles.

Sprint Nextel said it does not know how its Maryland cell phone operations, with 668 workers, would be affected by the cuts.

Maryland has not been immune from the job losses. State officials said yesterday they received layoff notices earlier this month from several businesses. They include:

* 62 workers at bankrupt consumer electronics retailer Circuit City's Catonsville store.

* 119 at Ferris, Baker Watts offices across the state, which was bought last year by RBC Wealth Management, a division of Royal Bank of Canada.

* 147 workers at U.S. Foodservice, the Columbia-based food distributor.

Yesterday's U.S. announcements joined huge layoffs announced by companies overseas. They included 7,000 jobs at ING, the biggest Dutch financial services firm; 6,000 at consumer electronics maker Royal Philips Electronics NV; and 3,500 at Corus, the unit of India's Tata Steel Ltd., Europe's second-biggest steelmaker.

"The fact that we're seeing massive layoffs now, they believe the contraction will last for a long time and that the economy won't come back for a long time," said Pete Kyle, a finance professor at University of Maryland's Robert H. Smith School of Business and a member of Nasdaq's economic advisory board. "As you enter the recession, firms hoard labor, but when the recession gets bigger, they give up on the idea of hoarding labor and they start letting labor go."

Noting the most recent job cuts, President Barack Obama said yesterday that Congress can't delay passing an $825 billion economic recovery program.

"We owe it to each of them and to every single American to act with a sense of urgency and common purpose," he said at the White House.

"We can't afford distractions, and we cannot afford delays."

But even with the passage of a stimulus plan, economists say, the labor market will recover slowly.

"Even after the unemployment rate peaks at the end of the year to 2010, businesses will not be staffing up as quickly as they cut," Dye said. "It's going to take a while to have the confidence to start expanding payrolls."

In the meantime, economists worry about the toll on workers, who are facing not only more layoffs but reduction in other benefits, such as shorter work hours and freeze in 401(k) matches.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.