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Planned layoffs sink to 4-1/2-year low
Challenger survey says April job cut announcements fall a third from prior month; hiring picks up.
May 3, 2005: 12:09 PM EDT

NEW YORK (CNN/Money) - Employers announced the fewest layoffs in more than four years in April, according to a monthly survey of job cuts released Tuesday.

The survey by outplacement firm Challenger, Gray & Christmas found employers planned 57,861 job cuts in the month, down 40 percent from the first quarter average, and a third lower than the March layoff announcements. It marked the lowest total since the November 2000 survey, when there were 44,152 job cuts announced.

"The lowest job-cut figure since 2000 is certainly great news for an economy that has been struggling for over two years to produce definitive signs of a strong turnaround," said a statement from John Challenger, CEO of the firm. "The news could get even better in the months to come, since our data show that job-cut activity slows considerably during the summer months."

Another survey by the firm found hiring announcements also picking up, with employers announcing plans to add 22,452 jobs, up 21 percent from the March total. But Challenger said even with those two positive readings, it is too soon to predict a large pickup in employment.

Retention, not hiring

"Employers seem to be shifting their focus from job elimination to worker retention, which could lead to lower job-cut figures in the months ahead," he said. "However, this may correspond with lower job growth, as employers take a wait-and-see approach to staffing. They may ask current employees to put in longer hours and/or utilize more productivity enhancing technology before adding to their payrolls."

Some of the common reasons given for layoff announcements, such as plant closings or mergers and acquisitions, saw sharp drops in the number of job cuts attributed to them.

Closings were responsible for only 11,333, less than half or 25,284 layoffs blamed on plant closings in March. Merger-related job cuts fell to 6,736, just over half the 12,441 layoffs blamed on that in March.

Industrial goods, governments and non-profits were the sectors hit hardest by the April downsizing announcements.

While many of the layoffs won't take place for weeks or months to come, the downturn in job cuts is consistent with some other reports, said Mark Vitner, senior economist with Wachovia Securities. He pointed to a drop in weekly initial jobless claims filings as well as stronger data from the job opening and labor turnover from the Labor Department.

"The labor market seems to be improving," said Vitner. "It bolsters the case we've been making that the economic slowdown story is a little oversold. Clearly growth is moderating, but we're still likely to see some decent growth the second half of the year."

But Robert Brusca of FAO Economics said the April layoff number only looks good in comparison to other months during the recession and the weak hiring environment that followed the recession.

"Only by the standards of recession is this number low," he said in a note to clients. "The best news is that things are not getting worse in April despite ongoing weakness in (manufacturing) and in durable goods orders."

The report comes ahead of Friday's April employment report from the Labor Department. Economists surveyed by Briefing.com forecast that employers added 175,000 jobs in April, up from 110,000 in March. Vitner's forecast is for a 180,000 gain in payrolls.

But economists' consensus forecasts have overestimated payroll gains in all but two of the last 10 months of reports, often by a large margin.

The unemployment rate is forecast to stay unchanged at 5.2 percent.

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