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Jan 7, 2009

U.S. December Job Cuts Quadruple From Year Ago

Job cuts announced by U.S. employers almost quadrupled in December from a year earlier, paced by declines at financial firms, chemical makers and retailers as the recession rippled through the economy.

Firing announcements rose 275 percent last month from December 2007, to 166,348, Chicago-based Challenger. Gray & Christmas Inc. said today. For all of 2008, employers announced 1.22 million job cuts, the most in five years.

The economy is caught in a self-perpetuating cycle of rising job losses and declines in consumer spending that threatens to extend and deepen the economic slump this year. President-elect Barack Obama has said his top priority after taking office will be to pass a stimulus package that will save or create 3 million jobs.

“Unfortunately, heavy job-cutting could continue through at least the first half of 2009,” John A. Challenger, chief executive officer of the placement company, said in a statement. “Nearly every industry experienced higher job cuts in 2008, as fallout from the collapse of the housing and financial markets spread throughout the economy.”

The U.S. economy probably lost 500,000 jobs in December, according to the median projection of economists surveyed by Bloomberg News ahead of the Labor Department’s Jan. 9 employment report. That would bring the total decline for last year to 2.4 million, the most since 1945.

Seven-Year High

The number of planned job cuts decreased 8.4 percent last month from November’s almost seven-year high of 181,671, Challenger said. The figures aren’t adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of monthly numbers.

Financial companies led industries in announced cutbacks, with 39,604 last month, and also had the most announcements for the year at 260,110. It was the third-biggest industry annual total since records began in 1999, Challenger said.

Chemical companies and retailers had the next greatest number of job cut announcements in December, with 17,968 and 17,783, according to today’s report.

The Christmas holiday shopping season may have been the worst since at least 1970, with same-store sales dropping 1.5 percent to 2 percent in November and December, according to a forecast by the International Council of Shopping Centers.

Best Buy Co., the largest U.S. electronics retailer, said Dec. 16 it will offer voluntary severance packages to almost all its corporate employees and will slash spending on new equipment in an effort to cut costs. If not enough employees participate, some may be fired, the company said.

The Challenger report doesn’t always correlate with figures on first-time jobless claims or employment as reported by the government.

Many job cuts are carried out through attrition or early retirement. Some employees whose jobs are eliminated find work elsewhere in their companies, and some announced staff reductions never take place because business improves. Challenger’s totals also include foreign affiliates.

Source : Bloomberg
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