January 2014 Challenger Job Cuts Surge 47%

EMPLOYERS PLAN 45,107 JOB CUTS; RETAILERS LEAD PACK AS HOLIDAY SALES DISAPPOINT

from Challenger, Gray & Christmas, Inc.

After falling to a 13-year low in December, monthly job cuts surged nearly 50 percent to kick off 2014, as U.S.-based employers announced plans to reduce their payrolls by 45,107 in January. The 45,107 job cuts last month were 47 percent higher than a December total of 30,623, which was the lowest one-month total since 17,241 planned layoffs were announced in June 2000. January job cuts were up 12 percent from the same month a year ago, when 40,430 job cuts were recorded.

The 45,107 job cuts last month were 47 percent higher than a December total of 30,623, which was the lowest one-month total since 17,241 planned layoffs were announced in June 2000.  January job cuts were up 12 percent from the same month a year ago, when 40,430 job cuts were recorded.

The heaviest downsizing activity occurred in retail, where poor earnings led to a wave of job cut announcements from several national chains, including Macy’s, Sam’s Club, JC Penney, Sears, Best Buy and Target.  Overall, retailers announced 11,394 job cuts in January; a 71 percent increase from the 6,676 retail cuts tracked in January 2013.  Last month’s retail cuts were the heaviest for the sector since last March, when 16,445 planned layoffs were announced. John A. Challenger, chief executive officer of Challenger, Gray & Christmas stated:

Holiday sales gains were relatively weak and many retailers achieved the gains by slashing prices on their products, which adversely impacted their year-end earnings.  The post-holiday job-letting in the sector was inevitable.

Retail employment will, in fact, fall further than the announced job cuts indicate.  Starting in January, retailers started shedding the tens of thousands of temporary seasonal workers hired to help handle the holiday rush.  The announced job cuts, on the other hand, will impact full-time, permanent workers in the stores and at the corporate offices of these struggling chains.

J.C. Penney Co., for example, announced that it would be cutting 2,000 workers from its payrolls through the closure of 33 stores.  Meanwhile, reports indicate that Macy’s will rely on a combination of store closures, job cuts among front-end store personnel, as well as a reduction in some merchandise planning positions and central office roles to reduce its headcount by 2,500 jobs.

Not every sector announcing job cuts is struggling.  Several significant job-cut announcements came from companies in the high-flying technology sector.  The computer industry ranked second among January job cutters, announcing plans to shed 6,456 during the month.  That was up 146 percent from the previous January when these firms announced 2,626 job cuts. Challenger said:

Perhaps the most notable cuts in the tech sector came from Intel and EMC Corp.  In both cases, the cuts were due to shifts in business strategies.  In these situations, it is not uncommon for job cuts to occur in one area while hiring occurs in another.  In fact, EMC indicated in its announcement that it expects to end 2014 with the same number of employees it had to begin the year.

The financial sector, which finished 2013 as the top job-cutting sector of the year with 60,962 announced layoffs, started 2014 as the third largest job-cutting sector.  Employers in financial services reported 4,817 planned layoffs in January.  That is 44 percent fewer than the 8,578 financial job cuts these firms announced to begin 2013.

This could be another year of significant downsizing in the banking industry.  While the housing market is bouncing back, many banks had ballooned their staffing in mortgage lending area to deal with foreclosures and troubled assets.   As the number of foreclosures, refinancings, and troubled mortgages continue to decline, so will the need for these extra workers.  The remaining mortgage bankers should be busy with increased home lending, but right now the staffs are larger than demand warrants.