Caterpillar cut its profit and revenue guidance on Monday, Oct. 22, 2012, saying the world's economic conditions are weaker than we had previously expected. (Photo: Seth Perlman, AP)
Just when it looked as if the economy was upsizing, more companies are downsizing.
A
mounting number of companies, including many tech firms, have been
announcing layoffs, prompting some to worry about the proliferation of
pink slips amid third-quarter earnings reports showing nearly zero
growth.
"We've seen a spate of bad earnings announcements," says
John Challenger of outplacement firm Challenger Gray & Christmas.
"Companies often take fast action," which results in job cuts.
Colgate-Palmolive
was the most recent example Thursday, with plans to cut 2,300 jobs. But
that announcement just piled on top of similar revelations from firms
such as online game company Zynga, heavy equipment maker Caterpillar,
computer chipmaker Advanced Micro Devices and chemical firm DuPont in
recent weeks.
Early data point to a disturbing rise in layoffs, as seen by:
-- Recent uptick in layoffs. Companies
in North America announced plans to cut more than 62,000 jobs since
Sept. 1, says Bloomberg News. That's the biggest two-month slashing of
jobs since the beginning of 2010.
-- Heavy hits by specific industries. There
have been 40,671, 33,063 and 7,714 job cuts announced by the computer,
transportation and insurance industries collectively this year through
September, says Challenger Gray & Christmas. These are increases of
240%, 184% and 180% from the same periods last year. Tumult in the
computer industry is a big reason for the hit to computer firms such as
Hewlett-Packard, says Challenger.
-- Rise in mass layoffs. Employees
levied 1,316 mass layoff actions in September, 49 more than in August,
affecting 122,462 workers, says the U.S. Bureau of Labor Statistics.
Mass layoffs are those that affect 50 workers or more.
Much of
the recent layoff activity is connected to what's been the slowest
period of earnings growth since the third quarter of 2009. Analysts are
expecting companies in the Standard and Poor's 500 to report 0.4% higher
earnings. Meanwhile, five of 10 industries are expected to post lower
earnings, including materials and energy.
It's not all bad news.
Layoff announcements in September were up 4.9% from the 20-month low in
August, but still down 71% from a year ago, says Challenger Gray &
Christmas.
The job cuts are just part of companies' snap
decision to hold down expenses, given questions about the looming fiscal
cliff and taxation after the November election, says Jack Ablin of BMO
Private Bank. Lagging revenue growth, too, has forced companies to
resort to cost-cutting to reach profit goals, he says.
Meanwhile,
with China's economic growth slowing, many business leaders are less
confident that demand from Asia can make up slack in weak domestic
markets, says Michelle Clayman of New Amsterdam Partners. "It's hard for
companies to keep pumping out product if not seeing end demand," she
says. "Labor costs are a large part of total costs."
USA Today