Experts: Layoffs May Worsen Until Economy Picks Up

Monday, 01 Aug 2011 12:00 AM

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High-profile layoffs like the ones announced by HSBC, Cisco and Merck may get worse until the economy picks up, experts say.

"These heavy cuts are a sign the economy is stalling. The GDP numbers back it up," says John Challenger, CEO of Challenger Gray and Christmas, which monitors layoffs, according to CNBC.

"This is a concrete result of what you get when you see GDP stalling under 2 percent, like we've seen for two consecutive quarters."

Real gross domestic product (GDP) grew 1.3 percent in the second quarter of this year, below private-sector expectations of 1.8 percent growth, according to the Commerce Department.

Some blame the weak job market on a lack of hiring and not so much on the recent firings.

"So far, it's been a lack of hiring, but I thought it was more due to things like the Japanese quake effect on motor vehicles. But when you see these kind of growth rates, you're (companies) going to start refocusing on costs and that means layoffs. If we stay here much longer, there's going to be more cuts," says Moody's Economy.com economist Mark Zandi, CNBC adds.

Many expect the second half of this year will see stronger growth rates, but uncertainty still persists, even more so thanks to the U.S. debt-ceiling crisis.

"There’s nothing that you can look at here that is signaling some revival in growth in the second half of the year, and in fact we may see another catastrophically weak quarter next quarter if things go wrong next week," says Nigel Gault, chief United States economist at IHS Global Insight, referring to the debt ceiling talks, according to the New York Times.

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