Job cuts announced by U.S. employers dropped in January, indicating the slowdown in firings in the last half of 2010 is continuing this year.
Planned firings fell 46 percent to 38,519 last month from 71,482 in January 2010, according to Chicago-based Challenger, Gray & Christmas Inc. It marked the fewest job cuts for any January since record-keeping began in 1993. The year-over-year decrease was the biggest since August.
“What made this January figure so unusual is that it was so low,” John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. “Even in the 1990s, when annual job cuts were relatively low, January still averaged more than 74,000 job cuts.”
While companies trim fewer workers from payrolls, they need to step up the pace of hiring to further drive consumer spending, the largest part of the economy. Federal Reserve policy makers last month pledged to continue their $600 billion stimulus as the unemployment rate holds above 9 percent.
Compared with December, which saw the fewest firings since June 2000, job-cut announcements increased 20 percent. Because the figures aren’t adjusted for seasonal effects, economists prefer to focus on year-over-year changes rather than monthly numbers.
Government and non-profit agencies led the January job cuts with 6,450 announced reductions, according to Challenger. Retail companies had the next-largest number of cuts, with 5,755.
New York, the third most-populous U.S. state, could fire as many as 9,800 workers after Governor Andrew Cuomo proposed cutting local school funding by 7.3 percent and reducing Medicaid spending by almost $3 billion in a budget that seeks to close a $10 billion deficit. Cuomo isn’t seeking new taxes or borrowing to close the deficit.
Aid to 700 school districts, New York’s largest expense, would be cut by $1.5 billion to $19.4 billion in the fiscal year beginning April 1, according to the governor.
“The government and non-profit sector has, or course, struggled immensely throughout the recession and into the recovery,” Challenger said. “Unfortunately, there are no signs of a turnaround in 2011.”
California led all states with 4,848 announced job cuts, followed by Illinois with 4,078.
Today’s report also showed that employers announced plans in January to hire 29,492 workers, up from 10,575 the prior month. Retail and computer companies led the gains, planning to add 10,925 and 6,740 positions, respectively.
Employers probably added 142,000 jobs in January as the jobless rate rose to 9.5 percent from 9.4 percent, according to the median forecast in a Bloomberg News survey of economists. The Labor Department will release the figures Feb. 4.
The economy grew at a 3.2 percent annual rate in the fourth quarter of 2010 as consumer spending climbed by the most in more than four years, a Commerce Department report showed last week.
“The economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions,” the Fed said in a statement after its Jan. 25-26 policy meeting. “The unemployment rate is elevated.”
Challenger’s data do not always correlate with figures on payrolls or first-time jobless claims as reported by the government. Many job cuts are carried out through attrition or early retirement. Some employees whose jobs are eliminated find work elsewhere in their companies and many announced staff reductions never take place because business improves. The totals also include foreign affiliates.
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