Employers Announce 71,482 Layoffs To Start 2010

John Challenger

Chicago, February 3, 2010 – Employers last month announced plans to reduce payrolls by 71,482 workers, the highest job-cut tally in five months. The surge was due primarily to heavy downsizing in the retail and telecommunications sectors, according to the latest job-cut report released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc.
The January job-cut total was 59 percent higher than December 2009, when announced layoffs fell to a 24-month low of 45,094. This is the first increase in monthly job cuts since last July. It is the largest monthly total since last August, when employers announced 76,456.

While layoffs increased from December, the January total was 70 percent lower than the 241,749 planned job cuts announced the same month a year ago. January 2009 marked the peak of downsizing activity in this recession, with job cuts hitting their highest level in seven years.

As was the case in January 2009, last month’s job cuts were led by retail-sector employers, which not only eliminated many of the seasonal positions added between October and December, but also many of the full-time, permanent jobs that existed before the holidays. Retailers announced plans to cut 16,737 jobs last month. That was 69 percent lower than the previous. However, it was the largest monthly total for the sector since last February (18,759).

Telecommunications firms were the second-leading job cutter in January, with 14,010 announced layoffs. That was the heaviest downsizing the sector has seen since last July, when 17, 601 job cuts were announced.

Pharmaceutical also experienced its heaviest downsizing in nearly a year, with employers in this sector announcing 8,170 job cuts, the highest total since last March’s 17,796.

“The increase in January is not necessarily a sign of a recession relapse. It is not uncommon to see a surge in job-cut announcements to begin the year. Companies are making adjustments based on the previous year’s results and the outlook for the year ahead. The beginning of the year is particularly rough on retail workers, as these employers enter one of the slower sales periods of the year,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“Heavy job cuts could continue in retail and other sectors through the first quarter. If the past is any indication, however, layoffs should slow in the spring and summer. We are certainly starting 2010 on better footing than a year ago. The fact that January job cuts did not exceed 100,000 bodes well for much lighter downsizing this year. Of course, any major shock to the economy could set off a surge in job cuts but, at the moment, conditions appear to have stabilized,” said Challenger.

“This year, many human resources professionals will be turning their focus from the workforce reduction strategies of a year ago toward workforce retention strategies. It could be several months before hiring begins to accelerate but, in the meantime, employers are trying to hold on to the skilled workers they have counted on to get them through this downturn.

“As the economy improves, it will become more difficult to keep workers from seeking greener pastures. This desire to explore new opportunities may be particularly acute at companies that enacted salary freezes or pay cuts, slashed or eliminated bonuses, or forced workers to take unpaid vacations. These measures may have been necessary to stave off job cuts and keep business afloat, but they take a toll on employee morale,” said Challenger.

“Some firms may use townhall meetings to reach out to their employees to let them know how much they are valued. Since many companies have yet to benefit from the early recovery, some may try to find non-monetary ways to reward their top talent, such as providing extra time off or increased telecommuting opportunities. Others may use financial incentives that pay dividends once the economy improves. Whatever the method, the key for employers is to communicate to employees how critical they are to the company’s future,” he added.

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