Research >> Economics

Challenger Layoffs jumped 49% in July


The unexpectedly large layoffs announced by Microsoft helped push July job cuts to the second highest level of the year. In all, U.S.-based employers reported plans to reduce payrolls by 46,887 during the month, according to the report released Thursday by global outplacement consultancy Challenger, Gray & Christmas, Inc.

The July total was up 49 percent from June’s 31,434 job cuts, which was the fewest number of cuts announced, year to date. It was 24 percent higher than the 37,701 cuts recorded in July 2013. The only month to see more job cuts so far this year was May, when job cuts reached 52,961. Employers have announced 292,921 job cuts, to date. That is 1.3 percent fewer than the 296,633 job cuts announced in the first seven months of 2013.

July job-cut news was dominated by Microsoft, which announced plans to reduce its workforce by as many as 18,000. That is the largest downsizing in the company’s history. It is also the largest layoff announcement this year, surpassing fellow tech giant Hewlett-Packard’s announced plans to shed as many as 16,000 workers from its payroll.

The combined cuts by H-P and Microsoft have helped make the computer industry the leading job-cut sector through July. Computer firms announced a total of 48,361 job cuts in the first seven months of 2014, 125 percent more than the 21,517 recorded during the same period a year ago.

A large portion of the Microsoft job cuts were related to its acquisition of Nokia in 2013. However, like Hewlett-Packard, the tech giant is attempting to streamline in order to become more nimble and competitive in an industry that is constantly changing. Both companies were slow to react to the shift from PCs to mobile and simply do not want to get caught flat-footed again. In order to do that, both companies had to flatten the bureaucracy and foster a more entrepreneurial approach to decision making.

The 48,361 job cuts announced by computer firms this year is 85 percent more than the second-ranked retail industry, which has announced 29,046 job cuts this year, including 2,183 in July. The year-to-date retail total is down 16 percent from a year ago (34,694).

The large job cuts in the computer industry are certainly not a sign of a stalling economy. The fact is, these are companies that are trying to adjust to where the growth is occurring. The economy is on an upward trajectory, as evidenced by the fact that 18 of the 28 industries we track have seen job cuts decline this year. Even among those with increased job cuts, the year-to-date totals are relatively low by historical standards.

As layoffs continue to decline, along with unemployment rates, perhaps the biggest threat to economic growth going forward is the shortage of skilled workers. Some industries and some regions of the country are already experiencing labor shortages. Houston, for example, has flourished thanks to a resurgence in the energy markets, but worries over a shrinking talent pool has area businesses partnering with junior colleges, high schools and social service agencies to prepare workers for the skilled trade jobs being created by the thousands.

In Detroit, demand for accountants is leading to increased salaries, referral and signing bonuses, and generous perks. Candidates are being wined and dined and taken to sporting events by senior partners in the big accounting firms, according to a recent article in Crain’s Detroit Business.

Granted, there are still several major metropolitan areas still struggling with high unemployment, but jobless rates are falling around the country and barring any shock to the economy over the next five to 10 years, labor shortages are likely to spread.




Posted: July 31, 2014 Thursday 07:30 AM




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