Layoffs undermining recovery, experts say
By Gary Strauss
USA Today
Rising corporate layoffs are beginning to undermine the nation's economic recovery, labor experts and economists say.
Last week, R.J. Reynolds Tobacco announced it was slashing 2,600 jobs, or about 40 percent of the No. 2 cigarette marketer's workforce. The long-rumored purge is the latest in a string of post-Labor-Day announcements of layoffs at technology companies and manufacturers that will eliminate thousands of jobs.
Also last week, Sprint, the country's fourth-largest long-distance carrier, said job cuts would likely be part of a three-year plan to save more than $3 billion. And Corvis, a one-time highflying telecom equipment vendor, said that it would eliminate 200 jobs, or 14 percent of its workforce.
"The job market seems to be listing again, and without job growth, the recent rebound in the economy isn't sustainable," says Mark Zandi, chief economist at Economy.com.
While more precise September job layoff statistics won't be known for weeks, more job cuts loom, reversing a four-month string of shrinking layoffs. Historically, job cuts are the largest in the fourth quarter as financially strapped companies scramble to meet full-year projections, says John Challenger, CEO of outplacement specialist Challenger Gray & Christmas.
SBC Communications, the nation's No. 2 local phone company, said last week that its workforce would continue to shrink because of lower demand and cost-cutting efforts.
Thousands of job cuts are expected at Big Three automakers Ford, General Motors and DaimlerChrysler. The United Auto Workers has already agreed to unspecified cuts under tentative labor agreements with Ford and DaimlerChrysler, and is negotiating a new deal with GM. The automakers continue to face declining profits and market share.
"There are still great pressures on companies to cut losses and costs," Challenger says. "Many blue- and white-collar jobs are being globalized. That means languishing job growth" in the United States.
R.J. Reynolds' job cuts — including up to 1,700 of 4,200 employed in Winston-Salem, N.C. — are part of a plan to cut $1 billion in expenses by 2005, says spokeswoman Jan Smith.
Economists have characterized the economic recovery as a jobless expansion. But if job growth doesn't rebound soon, consumer confidence is likely to slide. "The economy will falter again if we don't have a better job market," Zandi says. "Tax cuts and mortgage borrowings can only work so far."
Others say layoffs are here to stay.
"Going forward, even when the economy looks like it is booming, the competitive nature of business and the ebbs and flows of sectors will cause companies to restructure," says Joel Naroff of Naroff Economic Advisors. "This is the dynamic of a competitive market. It's a fact of economic life we have to get used to."
