Money minders and economy watchers got bad news Thursday when Challenger Gray & Christmas reported Job Cuts climbed by 20% in November. It’s a bad sign for an economy on the brink of a fiscal cliff freefall. Furthermore, the situation seems to be deteriorating in December, with a high profile mass purge plan just admitted by Citigroup (NYSE: C).
Regarding November, immediate blame wants to find Hurricane Sandy, but truth be told, huge responsibility falls upon the bankruptcy of Hostess Brands and its mass impact to the labor count, with 19,709 jobs lost. If not for the Hostess failure, announced layoffs would have fallen in November from October’s tally of 47,724. Instead, we saw the layoff count rise to 57,081.
Still, big layoffs are commonplace, however unpredictable. After all, the month marked the third consecutive increase. That reflects poorly on the fourth quarter, so that the year-to-year improvement marked thus far in 2012 might narrow before year’s end. Through November, year-to-date, total layoffs have measured 13% less than in 2011, at 490,806. The pressure is not easing either with Citigroup’s (C) just announced reduction of 11,000 jobs; those will impact December’s data.
Big impact layoffs have dictated doom in 2012, with Hewlett-Packard’s (NYSE: HPQ) high profile headcount cut of 27,000 workers in May followed by a Ford (NYSE: F) firing in June. Ford’s reductions made up almost a quarter of the total layoffs for that month. Citigroup’s cuts may be followed by more massacres on Wall Street in December. New York is already third in job cuts this year, behind California and Texas. A New York Post article published in late September which referred to the comments of a banking analyst at Nomura, indicated that banks would need to cut workforce to safe-keep return to shareholders.
Some say the workforces of Wall Street will be 10% to 15% slimmer in 2013. European banks have been more active for obvious reasons, with Deutsche Bank (NYSE: DB) announcing a cut of 1900 people in July. UBS (NYSE: UBS), Credit Suisse (NYSE: CS) and Goldman Sachs (NYSE: GS) announced cuts around the turn of last year. Bank of America (NYSE: BAC) has continuously chipped away at the 30,000 jobs it said it would shed last year in September. Morgan Stanley (NYSE: MS) is likewise working on previously declared firings. J.P. Morgan Chase (NYSE: JPM) has actually added jobs over the last three years. Still, with margins tight due to record low interest rates, and with global economies at issue and markets complicated as a result, the banks have increasingly turned to expense reduction to save return to shareholders. Still, layoffs can go too deep and significantly impair revenue generation, so a fine dividing line must be carefully approached on Wall Street. Financials led layoffs in years past, but this year’s biggest job cutters by industry have come from computers (on HP), transportation (Ford), food (Hostess), Healthcare/Products & Retail.
The end of the year can be hotter for the hook, as companies look to meet their new (and likely slimmer) budgets. Likewise, a tight and limited bonus pool can influence thinking about inefficient producers. A quick cut can mean a fatter bonus for survivors, ignoring the costs of litigation etc. Some companies also benefit from a write-off around the close of the year, to help fog the red reality they might otherwise have to show shareholders. Finally, I believe the fiscal cliff issue has frozen the hands of small businessmen, and that the cliff and also the re-election of the health conscious President has large and small firms contemplating rising healthcare costs and workforce counts. Whatever the case, I think we can all agree the current period is not one inspiring of new hiring. As I continue to cover economic reports and the economy, readers may want to follow the column.
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