Bad quarter? Time to swing the job ax
Job cuts mount as companies try to cut costs amid disappointing quarterly results.
NEW YORK (CNNMoney.com) -- As disappointing quarterly results come pouring in, companies trying to boost profitability are looking to cut costs in a tried-and-true way: cutting tens of thousands of jobs.
Earnings for the first quarter are expected to be 14.6% lower than the same period last year, following a fourth quarter of 2007 that showed a drop of 21.5%, according to Thomson First Call.
That would mean the past six months have produced the worst results since the final quarter of 2001 and first quarter of 2002 - the last time companies posted back-to-back quarters with double-digit percentage earnings declines.
"We know that the economy is in or near a recession, so that puts great pressure on companies' bottom lines," said John Challenger, CEO of outplacement firm Challenger Gray & Christmas. "Companies are looking to keep staffing levels even with demand for their services."
Amid tough economic times, that demand for jobs has been dwindling.
After reporting yet another quarterly loss Friday - this time losing $5 billion - Citigroup (C, Fortune 500) announced it would cut another 9,000 jobs, on top of the 4,200 cuts announced during the previous quarter.
The telecommunications company said that overall employment won't change in 2008, however, as it expects to add jobs in "growth areas."
On Thursday, motorcycle manufacturer Harley-Davidson (HOG, Fortune 500) said it would cut 8% of its workforce, about half of which will come from the production unit. Even after reporting better-than-expected earnings, slumping demand has hammered the bike maker, which plans to cut 730 jobs.
Planned job cuts have also been recently announced at Eli Lilly, The New York Times, AMD, Dell, Motorola, and Yahoo among others.
Layoffs to continue: And layoffs will only continue as the U.S. economy struggles to stay afloat.
"Companies can't afford to keep extra staff on hand anymore," said Challenger, who said companies will continue to staff up or staff down in sync with their business success.
"As profitability and revenue drop, companies will continue to ratchet down on jobs," he added.
And even with the U.S. economy losing a net 238,000 jobs in the first quarter of 2008, weak economic conditions could yield an even greater number in the current quarter.
"Job losses so far have been far less than we see in a typical recession," said Wachovia economist Mark Vitner. "We knew it was only a matter of time before we started to see more sizeable job cuts."
Vitner expects to see about 300,000 more cuts in the second quarter, especially in sectors that are tied to housing or mortgage finance. Rising energy and gasoline costs will also hurt companies in areas like retail, as consumers put off buying non-essential items they can no longer afford.
Some sectors adding jobs: But not all companies are scaling back. Google (GOOG, Fortune 500) said it hired more than 2,300 new employees in the first quarter in its impressive earnings announcement on Thursday. And sectors such as accounting, energy, health care, and agriculture seem to be immune to job cutting - and are even adding positions.