Job cuts cast dark cloud over economy
Widespread announcements of corporate job cuts deal chilling reminder that economy likely to worsen before it recovers.
NEW YORK (CNNMoney.com) -- As the economic outlook worsens, job cut announcements have come in hard and fast this week from businesses across the nation.
Citigroup (C, Fortune 500) announced Monday it will cut more than 50,000 jobs - one of the largest announced payroll scale backs in history. Boeing (B) said Tuesday it will cut upwards of 800 jobs, Bank of New York Mellon (BK, Fortune 500) plans on cutting 1,800 jobs and Washington Mutual added 1600 jobs to the toll on Thursday.
In all, employers have announced in excess of 110,000 job cuts thus far in November - over 60,000 of which were announced this week alone. Though many of the job cuts represent global figures or won't take place until next year, the ever-worsening job scene is an ominous sign before this month's payroll figures are announced in two weeks.
"The pace of deterioration in the labor market is accelerating," said Sam Bullard, economist at Wachovia, who predicted the economy could lose upwards of 350,000 jobs this month.
The economy has shed more than 1 million jobs so far this year, according to the Department of Labor, and first-time filings for unemployment insurance increased 542,000 in the past week - the highest since July 1992. The numerous reports of corporate job slashing in November are a sign that the labor market won't start to recover any time soon.
Unemployment forecasts have risen as the economic outlook for 2009 continues to worsen.
The Federal Reserve Tuesday said it predicts the unemployment rate will remain around 6.5% for the remainder of 2008, and will rise up to 7.6% in 2009. But that's a far cry from the jobless rate forecast of 9% for next year with further increases in 2010 that Goldman Sachs released Friday.
Goldman said it expects the U.S. economy to shrink 5% this quarter with more gross domestic product declines in the first half of of next year. An economy in a recession will lead to "unequivocally the worst single downturn on record since World War II insofar as increases in joblessness are concerned," the forecast said.
"It's hard to have a lot of optimism about the job market, because there are so many headwinds facing the economy," Bullard said. "This is definitely the deepest consumer retrenchment since the mid-1970s."
Accordingly, more job cut announcements are likely on the way. U.S. automakers say they are on the verge of collapse, retailers are expected to have a miserable holiday season and financial institutions continue to struggle in the midst of a credit crisis.
But even if the economy begins to improve in the second half of 2009 as some economists predict, unemployment could still continue to rise. Typically job losses continue for many months after the economy begins to pull out of a recession, with unemployment rates peaking as much as a year after the recession hits its trough.
In an attempt to heal the ailing job market, President-elect Barack Obama has repeatedly stated his support for another economic stimulus package in the form of tax rebates to consumers, states and municipalities. The proposal has gained traction in Congress, with hopes that consumer spending and aid to governments will help boost the economy.