By Kate Gibson
The large wave of layoffs announced on Monday gave added impetus
to President Barack Obama's call for quick action on his stimulus
proposals but had little impact on the market, which was already
anticipating another 500,000 job losses this month.
"What is remarkable about today is the layoffs seem to be coming
from every corner of the economy. Usually there are sectors that
get hit particularly hard. This recession has been focused on
housing and financial services, although automotives have come into
it as well. But now we have other areas, like retail and
technology, as the next wave of the recession hits," said John
Challenger, CEO of Challenger, Gray & Christmas Inc.
The roughly 50,000 job cuts announced on Monday by U.S.
companies as well as several overseas represents one of the worst,
if not worst, to come on a single day since the year began. Since
Jan. 1, Challenger counts 128,600 planned cuts in looking at large
layoffs by 19 major U.S. corporations.
"Given the new headlines, I would imagine that 500,000 figure to
be revised higher, making this the third straight month in which
the economy has shed more than 500,000 jobs and the fifth straight
month more than 400,000, the first such occurrence of either dating
back to the beginning of 1939," said Dan Greenhaus, equity strategy
group, Miller Tabak & Co.
Additionally, a reading of exactly 500,000 would bring the total
number of jobs lost this cycle to 3.089 million over 13 consecutive
months, outpacing the 2.838 million jobs lost over 17 straight
months from August 1981 until December 1982, Greenhaus said.
"Layoffs are often a lagging indicator into what is going on
with the economy. Clearly it's a sign that they [the companies
shedding workers] believe the recovery is not right around the
corner," said Jeffrey Kleintop, chief market strategist, LPL
Financial.
Economic bellwether Caterpillar Inc. (CAT) was among those
wielding the axe, with the heavy machinery giant saying it would
slash 20,000 jobs during the first quarter. While Caterpillar's
grim forecast had its shares slumping 10%, the shares of some other
companies reducing employees moved in the opposite direction.
Given that much of Caterpillar's sales are outside the U.S., the
company's decision to cut its workforce signals the view that
"perhaps the U.S. economy emerges out of recession by the end of
this year, but the global economy may remain mired into 2010," said
Kleintop.
In afternoon trade, Caterpillar was one of 14 components
weighing on the Dow Jones Industrial Average (DJI), which reversed
course from earlier gains to fall 21.84 points to 8,055.82. The
S&P 500 (SPX) declined fractionally to 831.49, with financial
shares leading the losses, while the Nasdaq Composite shed 2.43
points to 1,474.86.
Another Dow laggard -- General Motors Corp. (GM) -- will lay off
2,000 more workers, The Wall Street Journal reported on its Web
site.
Monday's hits to the labor market will increase unemployment
expectations to 9% for many economists and creates a "deeper hole
from which we must emerge through," said Marc Pado, U.S. market
strategist at Cantor Fitzgerald.
Shares of Sprint Nextel Corp. (US-S) gained 2.9% after the
telecommunications company said it would cut about 8,000 jobs, or
about 14% of its workforce, in the first quarter to cut costs.
The tens of thousands of job cuts being announced each week is a
signal that "we're in the worst part of the recession," said Irwin
Kellner, MarketWatch.com's chief economist. Listen to more.
Home Depot Inc. (HD) saw its market valuation climb, recently up
3.6%, after the nation's biggest home improvement retailer said it
would shed 7,000 workers.
And drug goliath Pfizer Inc. (PFE) said it would lose more than
19,000 employees while buying rival Wyeth (WYE) in a $68 billion
deal.
Shares of Pfizer were down more than 10%.
"Further layoffs are indicative of the continued deterioration
in the U.S. economy specifically and the global economy more
broadly. I wouldn't read into anything specific from the numbers
but I will say that companies are adjusting to economic weakness
and addressing the source of most of their costs: labor," said
Greenhaus.
Corporations "are slimming down to adjust to lower levels of
demand which will help them weather the downturn. That said, I
think the continued stream of layoff announcements puts upward
pressure on upcoming labor market indicators including weekly
jobless claims and the employment report for January which is going
to be worse than is currently expected," said Greenhaus.
However, "the intensity of the latest round of layoff
announcements certainly raises concerns regarding growth here in
the first quarter," he added.
Job losses came from overseas as well, with Philips Electronics
(PHG), Europe's biggest consumer electronics firm, saying it would
lay off 6,000 workers. It also reported its first quarterly loss in
five years.
And steel giant Corus Group said it would cut 3,500 jobs around
the globe, with most, or about 2,500, coming in Britain.
Dutch bank and insurance firm ING (ING) said it would eliminate
7,000 positions after last month's first quarterly loss in the
company's history.
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