Jobs' woes unlikely to end anytime soon

May 07 2009 by Nic Paton Print This Article

First the good news. U.S banks are expected to pass their financial "stress tests" later today and the European Central Bank and Bank of England have both said they intend to pump yet more money into their ailing economies. But the bad news is that, according to latest research, these measures are unlikely to head off yet more jobs' carnage over the coming weeks and months.

U.S Treasury Secretary Timothy Geithner has said no U.S bank being screened by regulators is at risk of insolvency, in a move designed to calm jitters ahead of the results of the "stress tests" on the financial health of 19 U.S banks set to be released later today.

The tests, however, are expected to show that some banks will need to raise tens of billions of dollars bolster their finances, with Bank of America and Citigroup expected to be most in the spotlight.

On this side of the Atlantic, the European Central Bank has today cut interest rates in the to a record low of one per cent, down from 1.25 per cent, and agreed to pump about 60bn euros into the Eurozone's economy as part of its "quantative easing" measures.

At the same time, the Bank of England has said it will be keeping interest rates on hold at 0.5 per cent and injected an extra £50 billion into the UK economy, again as part of its quantitative easing strategy.

But, while all this activity does gradually appear to be bearing economic fruit, managers should not get complacent Ė there is still a lot of job cutting to come, according to two new reports.

Research by PricewaterhouseCoopers has suggested that more than a quarter of European companies expect their headcount to decrease this year, with the outlook most positive in Switzerland and France and worst in Sweden and Russia.

In the U.S the picture was even less rosy, with PwC arguing there may be an increased need for companies to hold their nerve and redefine what they mean by both "long term" and "success".

At the same time, research by pay and benefits specialist Croner Reward has found that nearly two-thirds of UK bosses have cut jobs in the past year and a further 70 per cent plan to do so. The PwC research of 700 companies from across 13 countries was conducted at the end of last year and asked about projections for 2009.

While many organisations were holding their nerve against short-term pressures to cut budgets and shed staff, others were clearly struggling, it found.

In Russia, for example, where oil prices could be critical to economic recovery, almost half of those polled predicted headcount cuts would this year.

Sweden and Ireland were also showing particular strain, with more than half and four out 10 anticipating reductions, respectively. But there was better news for workers in Switzerland, Turkey, Belgium, Poland, Germany and the Czech Republic, where a higher percentage of companies said they planned to increase headcount than expected to reduce it.

Michael Rendell, partner and global head of human resource services at PwC, said: "Business leaders across Europe and the US recognise the downturn is not the only challenge affecting their ability to compete and that in the long term they need to keep and be ready to mobilise their talent.

"But, in some countries and organisations, immediate cash pressures are very real and difficult decisions are being made. It has never been more important for HR decisions to be based in fact Ė this means ensuring accurate data, metrics and people information is available to support the business and prevent the wrong areas being cut or competitiveness undermined," he added.

In the US, where the same questions were asked at the beginning of 2009, the outlook was even more negative, with more than four out of 10 of the 300 respondents expecting to decrease headcount, four out of 10 predicting reduced training and development spend and almost half planning to cut their overall HR budgets. The Croner poll, meanwhile, asked more than 100 companies what measures they had taken to manage and control payroll costs in the current economic climate.

"In the space of twelve months we have moved on from a stable and relatively easy to manage range of factors for setting pay levels into a world where drastic measures are needed to keep on top of the issue," said Andrew Walker, head of Croner reward, at the prospect of more job cuts.