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posted on 01 September 2016

August 2016 Job Cuts Down As Downsizing Slowed

from Challenger Gray and Christmas

Downsizing slowed in August, as US-based employers announced plans to cut their payrolls by 32,188, a 29 percent decline from the 45,346 cuts in July

The August figure was the lowest monthly total since May (30,157) and the second lowest of the year. It was 22 percent lower than August 2015, when 41,186 planned job cuts were announced.

To date, employers have announced 391,288 job cuts in 2016. That is 10 percent fewer than the 434,554 job cuts recorded between January and August 2015.

The computer sector saw the heaviest job cuts during the month with 6,103. The bulk of the cuts came from Cisco Systems, which announced plans to reduce its workforce by 5,500. That was lower than the initially reported 14,000 cuts that were expected from the tech giant, but still represents a sizable downsizing in an industry that has experienced a surge in job cuts over the last 18 months. Said John A. Challenger, chief executive officer of Challenger, Gray & Christmas:

Since January of last year, there has been a string of large scale job cuts from major players in the technology sector, including Hewlett-Packard, Intel, Dell, Microsoft and, now, Cisco. The surge in cuts does not necessarily signal weakness in the sector, but it certainly signals a shift. In most cases, we are seeing these firms move from making hardware to providing services.

Computer firms have announced 55,567 job cuts this year. That is up 111 percent from last year, when cuts totaled 26,374 through the first seven months.

The computer sector ranks second in year-to-date job cuts behind the energy sector, which has announced 97,366 job cuts in 2016, including 2,430 in August. Unlike most months, August energy cuts were not dominated by oil-focused firms. Surprisingly, the majority of last month's cuts came from solar firms, including SolarCity and SunPower. Challenger noted:

Solar is a burgeoning segment of the energy sector that appears to be going through some growing pains. Competition is keeping prices low. Reports suggest that SolarCity is basically taking a loss on every installation. So, it is relying on volume, but the volume isn't quite where it needs to be. Meanwhile, utilities are paying less to solar companies in the power purchase agreements that are a staple of the business model.

August also experienced heavy job cutting in the industrial goods sector and entertainment and leisure, where employers announced 3,073 and 3,037 job cuts, respectively.

Low oil prices have been a contributing factor in the industrial goods sector, where many of the firms provide materials and equipment to the energy sector. In August, oil prices were blamed in just one announcement from an industrial goods firm, but that one announcement accounted for about one-third (1,000) of the sector's cuts during the month.

The bulk of the entertainment and leisure job cuts announced last month resulted from the closure of the Trump Taj Mahal casino and resort in Atlantic City. The closure impacted 2,845 employees.

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