Job losses coming to a desk near you

Jul 09 2008 by Nic Paton Print This Article

Job losses on both sides of the Atlantic are starting to accelerate as the credit crunch, soaring prices and economic downturn move off the financial pages and become a stark reality for workers and managers alike.

A raft of surveys and company announcements have pointed to a sharp increase in job losses with, in the US, research body The Conference Board identifying a decline in employment in June and July and more job losses to come in the months ahead.

It has echoed a UK study by the Recruitment and Employment Confederation and consultancy KPMG pointing to continuing falls in permanent placements and only sluggish growth in temporary jobs, with demand for staff contracting for the first time in five years.

While heavy job losses on Wall Street and in the City have been reported for some time, now companies such as Siemens and American Airlines are also announcing job cuts, along with house-builders such as Bovis Homes, Redrow and Persimmon as the housing market declines.

General Motors has been reported to be considering thousands of cuts in its workforce, while Chrysler and Starbucks are also making reductions.

According to the US Labor Department, job losses have now been rising for the sixth month in a row, with the number of people put out of work in the first half of the year close to half a million.

In June, employers shed 62,000 jobs, bringing total losses so far this year to 438,000, it said.

The unemployment rate, currently at 5.5 per cent, is expected to rise to more than six per cent, predict some observers.

Figures from the UK Chartered Management Institute in May also suggested that redundancies amongst the UK's executive population were now at their highest level since 2001.

"Most leading indicators of employment point to an even sharper deterioration in the labor market in the months ahead," said a gloomy Gad Levanon, senior economist at The Conference Board.

"The steep decline of the employment trends index in recent months, and the fact that its weakness is spread throughout all of its components, does not leave much room for optimism," he added.

"In addition to the jobs that were lost, the number of people who were working part-time but wanted a full-time job rose by 750,000 in the last six months. The decline in payrolls is still mostly concentrated in the construction and goods related industries," he said.

"Manufacturing, trade, construction and truck transportation industries shed 712,000 jobs in the last six months while the rest of the economy added 274,000 jobs," he calculated.

The KPMG/REC poll, meanwhile, argued that the UK jobs market was now weakening severely.

"Many employers now seem to be accepting the inevitable - they will have to cut costs by laying off people because their businesses won't be growing as much as they could have expected a couple of months ago," said KPMG director Alan Nolan.

"We already have seen widespread redundancy programmes in the City and among house-builders and there are more to come. Even the usually robust temporary jobs market is coming under pressure, adding to the likelihood of a stagnant jobs market and rising unemployment for the foreseeable future," he added.

Permanent staff placements declined for the fourth time in the past five months and at the sharpest rate in over five years, the survey found.

Temporary or contract staff billings did continue to rise, but the pace of growth eased to the slowest in five months, it added.

Underlying this drop in placements was a fall in permanent job vacancies for the first time in five years during June, the survey said.

And in a further sign of the way things were going, the supply of available candidates grew sharply in June, with rises in availability at strongest level since July 2003.

Employers should provide personal financial help and advice for those faced with the chop, consultancy Watson Wyatt has argued.

The complexity of many redundancy packages, combined with other employee benefits, in particular pensions, means that few people offered voluntary redundancy are properly able to weigh up the financial costs and benefits, it said.

"The fear that they may be making a costly financial mistake can hold many people back from taking redundancy so providing up-front financial advice can do much smooth the success of a voluntary redundancy programme," pointed out Mick Calvert, head of the financial planning group at Watson Wyatt.

"Companies often provide financial counselling after people have accepted voluntary redundancy but we believe it is vital to help employees have a solid understanding of the full financial impact of taking redundancy before taking the big decision. This is especially so for both older and senior employees whose financial situations are likely to be more complex," he added.

"While taking redundancy is obviously a huge decision for most employees, it is also important for employers to ensure all the information required to make that decision is well understood," he continued.

"Not only does it make it more likely that the right people will step forward it ensures that the employer brand is not put in jeopardy," he concluded.

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