Corporate downsizing has hit its fastest pace in five years, according to one widely watched measure, but the economy has proved so adept at absorbing displaced workers that economists say the layoffs pose relatively little threat to continued national growth.
"The U.S. economy is doing very well," said Robert D. Barr,
senior economist for the Federal National Mortgage Association, Fannie Mae, the Washington-based mortgage reseller. "We've generated about 2.5 million jobs so far this year. When you look at job growth vs. the layoffs, job growth is swamping the layoffs."
So far this year, U.S. companies have announced the elimination 574,629 jobs, surpassing announced layoffs in every other year this decade except 1993, according to Challenger, Gray & Christmas Inc., a Chicago personnel consulting firm.
The list got longer again yesterday. New York apparel concern Liz Claiborne Inc. said it will eliminate 400 jobs, and auto supplier Lear Corp., with headquarters in Southfield, Mich., said it would cut 2,800 jobs.
Corporations have disclosed plans to trim 216,000 jobs just in the past three months, said John Challenger, chief executive of Challenger, Gray. That's the worst three-month spurt in more than seven years, he said, rivaling a particularly bad stretch just after the last recession.
Some of the larger reductions announced recently include Boeing Co., which said it would cut 20,000 positions in addition to the 28,000 it had revealed in July; Raytheon Co., 14,000 jobs; and Exxon Corp. and Mobil Corp., which plan to merge and wipe out 9,000 jobs between them.
Analysts blame a continued corporate focus on profits and stock prices, combined with brutal competition and deflationary trends that rule out price increases for many businesses.
"It's been a very competitive environment for several years now," said Barr. "Certainly it's great news for the consumer. But, given an existing market share, if you're not able to raise your price, the other way to increase your profit is to go after your costs."
Price pressure has gotten especially acute this year, as the Asian economic crisis has hurt demand for products of all kinds, from oil to athletic shoes. The depreciation of overseas currencies against the dollar has added to the trouble for American factories, which shed 200,000 jobs for the first nine months of 1998, according to the U.S. Labor Department.
A stronger dollar makes U.S. goods less competitive against offshore manufacturers.
While traumatic for the affected workers, recent job cuts might cause more alarm among economic analysts if they hadn't been happening sporadically for many years, with few broad effects.
"It's more than a decade," said Joel Popkin, an economist and consultant in Washington. "If you go back to the 1980s, that's when cost-cutting started to kick in. It's probably been going on for 15 years."
For seven of those years, the growing U.S. economy has been able to absorb laid-off workers -- and then some. The national unemployment rate has steadily fallen from 7.8 percent in June 1992 to 4.4 percent in November.
Evidence suggests that many newly created jobs pay less than the phased-out ones. Recent Labor Department data, for example, show that the country is adding restaurant and retail jobs even as it's shedding higher-paying factory work.
Even so, the current expansion should be able to survive the recently announced layoffs, economists said. Bigger threats, they added, are continued deterioration of overseas economies or a pickup in inflation.
If a big spurt of layoffs had to happen, "it probably happened at the best possible time -- at least for the first group of people being laid off," said Joel Naroff, an economist with First Union Corp. in Philadelphia. "The labor market is still very tight. Many of these people will be able to find jobs reasonably easily."
The economy has been creating an average of 220,000 jobs per month this year, making up in less than three months for all of the downsizing tracked by Challenger all year. Challenger tracks only publicly announced layoffs, missing hundreds of thousands unheralded cuts at smaller firms. Even so, the country is expected to end the year with about 2.5 percent more jobs than it started with.
Most economists are calling for some measure of economic cooling next year, as the Asian slowdown reaps its due.
For example, Regional Financial Associates, a forecasting firm in West Chester, Pa., projects a 1.8 percent increase in the gross domestic product next year, down from an expected 3.7 percent rise this year. The consensus forecast of participants at a conference held by the Chicago Federal Reserve last week has the economy slowing to 2.1 percent in 1999.
That's a substantial slowdown, but it's still far from a recession.
As long as consumers continue buying goods and homes at a healthy pace, analysts said, the economy should be able to stay out of recession next year and provide at least some opportunities for laid-off workers.
"It's still clicking along," said Challenger. "Where I think it hangs in the balance is the world situation. Is the U.S. economy and its extraordinary job growth going to pull the world back up and get the machine moving? Or is the rest of the world going to slowly drain off the energy of the U.S. economy?"
Recent job cuts
G; Major layoffs announced by U.S. companies since Nov. 1.
Company ............ Layoffs announced
Boeing Co. .............. 20,000
Raytheon Co. ............ 14,000
Exxon Corp./Mobil Corp. .. 9,000
Deutsche Bank AG/
Bankers Trust Corp. ...... 5,500*
Gillette Co. ............. 4,700
Johnson & Johnson ........ 4,100
Merrill Lynch & Co. ...... 3,400
Lear Corp. ............... 2,800
Texaco Inc. .............. 1,000
Monsanto Co. ............. 1,000
Atlantic Richfield Co. ..... 900
Kellogg Co. ................ 765
BFGoodrich Co. ............. 775
fTC Callaway Golf Co. .......... 700
Liz Claiborne Inc. ......... 400
*includes jobs in the United Kingdom
Pub Date: 12/08/98