Monthly job cuts surged to the highest level since February, as U.S.-based employers announced plans in August to slash payrolls by 50,462, a 33.8 percent increase from the 37,701 planned job cuts announced in July, according to a report Wednesday from global outplacement consultancy Challenger, Gray & Christmas, Inc.
Job cuts last month were 57 percent higher than a year ago, when employers announced plans to reduce payrolls by 32,239. This marks the third consecutive month in which job cuts outpaced the comparable period from 2012. August ranks as the second largest job-cut month of the year behind February, when announced layoffs reached 55,356.
Employers have now announced 347,095 job cuts so far this year. That virtually matches the 352,185 job cuts announced from January through August 2012.
August workforce reductions were dominated by the industrial goods sector, where manufacturers announced 22,162 job cuts. That was the largest job-cut total for this sector since January 2009, when 32,083 planned layoffs were announced. It is the largest one-month job-cut total for a single industry category this year and nearly surpasses the 26,103 job cuts announced by industrial goods manufacturers in all of 2012.
“Heavy job cuts in the industrial goods sector are never a good thing, as they can be indicative of widening cracks in the economy’s foundation. However, the August surge in industrial goods job cuts was driven largely by falling global demand for mining equipment. While that definitely has an impact on the economy, it is not as worrisome as an overall slowdown in construction or manufacturing,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.
“The fact is U.S. manufacturing activity has been on the rise, hitting a five-month high in August, according to the most recent manufacturing purchasing index. Furthermore, GDP grew at a better-than-expected 2.5 percent annual rate in the second quarter. There are definitely challenges ahead, including the precarious situation in the Middle East, uncertainty over the impact of health care reform, and possible shifts in monetary policy, but the economy is in a much better position to weather these storms than it was just a year or two ago,” he added.
Well below the more than 22,000 job cuts announced in the industrial goods sector, the second-ranked computer sector announced 4,663 job cuts in August. That was up 194 percent from 1,587 job cuts by computer firms in July. To date, the computer sector has announced 26,180 job cuts, down 30 percent from the 37,670 layoffs recorded through eight months of 2012.
The financial sector remains the top job-cutting industry year-to-date, having announced 41,942 job cuts as of August. That eight-month total is 56 percent higher than the 26,887 financial-sector job cuts announced by this point a year ago.
Challenger recorded nearly 3,100 job cuts in the financial services industry last month, most of which were attributed to falling demand for mortgage products due to the recent run-up in interest rates.
With mortgage rates at record lows, there was heavy refinancing activity; representing 70 percent of mortgage originations at one major national bank in the first half of the year. With rates now climbing, refinancing products have dropped to half of all applications and is expected to decline further in coming months. The Mortgage Bankers Association reported that mortgage applications fell 4.6 percent in the week ending August 16.
“The housing market has been showing signs of life lately. It would be a real blow to the economy if that progress were to suddenly grind to a halt because of rising interest rates. This sector drives so many other parts of the economy, including construction, retail spending, consumer goods manufacturing, that it is vital to keep it moving upward,” said Challenger.Download Resource