Announced Job Cuts Fall 25% in November

A report Wednesday showing a decline in announced job cuts in November fueled optimism that layoffs might have peaked.

U.S. companies announced 181,412 job cuts last month, down from 242,192 in October, according to outplacement firm Challenger, Gray & Christmas Inc. The 25% drop from the October peak that followed the Sept. 11 terrorist attacks gave economists and job-market experts reason to hope the worst might be over for layoffs.

The number of cuts announced in November was the fourth-highest monthly total this year and 311% higher than the same month a year earlier. Although new rounds of job reductions are expected to push the layoff misery into next year, there are growing signs that a milder-than-expected recession may stem the tide of corporate blood-letting.

“The question is, are we going to see more layoffs next year relative to what we’ve seen this year,” said Joseph LaVorgna, senior U.S. economist at Deutsche Bank Securities in New York. “My guess is we’re not, because we expect the economy to recover.”

Another report issued Wednesday of an unexpected expansion in service-sector business in November was more good news for the employment outlook, said Sung Won Sohn, chief economist for Wells Fargo & Co.

The National Assn. of Purchasing Management said its non-manufacturing index, a service-sector gauge, surged to 51.3 in November from a four-year low of 40.6 in October. That far outpaced economists’ forecasts for 42.7. A reading above 50 indicates growth. The services sector includes everything from transportation to legal and financial services.

“The fact that services are improving way above expectations is a very positive and bullish sign because we are talking about 80% to 85% of jobs,” Sohn said. The NAPM and Challenger reports fueled optimism about the economy on Wall Street, helping push the Dow above 10,000 and Nasdaq above 2,000.

The economy has shed more than 900,000 jobs since September 2000, when job growth peaked, and economists expect the unemployment rate, which was 5.4% in October, to rise when preliminary figures for November are announced Friday. But there are many signs that the employment woes of this recession will be less acute than those of the early 1980s and early 1990s, economists said. Deutsche Bank’s LaVorgna and others expect the rate to peak at 6.3% to 6.5% by mid-2002. The time it takes a typical jobless person to find work also has stayed relatively low. The median duration of unemployment was about seven weeks in October. By comparison, it took a typical job seeker 9.3 weeks to find work in 1992 and 10 weeks in 1982.

As a percentage of overall employment, weekly initial claims for jobless benefits are 8% below what they were at the bottom of the last recession, said Ron Bird, chief economist for the Employment Policy Foundation, a business-backed Washington think tank.

Bird said it may be too early to tell if layoffs have peaked, but aggressive interest rate cuts, coupled with tax cuts and increases in government spending lay the foundation for a faster turnaround than the early 1990s when the jobless rate stayed above 7% for about a year.

Bird also noted that job losses have not been across the board. “The total jobs lost have outweighed the jobs gained, but there have been jobs gained in several sectors,” Bird said.

Even after a deluge of corporate layoffs, hiring has remained difficult in certain pockets, particularly for health-care workers and a variety of skilled technicians, said Sylvester Schieber, vice president of research and information for Watson Wyatt Worldwide, a human resources and financial management consulting firm.

A Watson Wyatt report this week underscored forecasts by the U.S. Bureau of Labor Statistics that the growth rate of the nation’s labor force slowed in the 1990s and will continue to slow through 2010, when jobs may exceed available workers by as much as 4.8 million.