In a single day, on Jan. 26, at least 50,000 new layoffs were announced at companies as varied as telecom giant Sprint Nextel (S), construction equipment maker Caterpillar (CAT), semiconductor manufacturer Texas Instruments (TXN), and pharmaceutical house Pfizer (PFE).
It was a stark reminder of how rapidly the recession is claiming jobs. Already 170,000 jobs have been lost in January. The U.S. economy lost 2.6 million jobs in 2008.
The worst news, though, may be that some economists say in their most optimistic view the U.S. has only reached the halfway mark in terms of the layoffs expected for this recession. A growing number of economists also say that the U.S. economy is not just shedding jobs temporarily, but may be undergoing a painful restructuring process that will eliminate some types of jobs for good. "We are seeing very large layoffs—the kind you get when companies don't expect to be re-employing any time soon," says Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. "They [represent] structural, not cyclical, changes to the economy. We're looking at a permanently smaller economy with prolonged unemployment at an unacceptable level."Jobs Gone for Good
Morici says that housing, real estate, automobiles, finance, and retail sectors are resetting to "permanent lower levels" of employment. Mike Montgomery, an economist with IHS Global Insight, asserts that many jobs in autos, manufacturing, apparel, and textiles aren't coming back. Those industries "have been in a long-term decline, and the recession is knocking them out."
"We are very early in the cycle," says Morici. "We are going to see the fury of the Old Testament for what we have done to the economy."
Many economists see nationwide unemployment rising to at least 9% this year, possibly reaching double digits in 2010. Thirteen states are already above the national average of 7.2%, with Michigan (9.6%), Rhode Island (9.3%), California (8.4%), and South Carolina (8.4%) topping the list.Worst Since 1982
On Jan. 26, a National Association for Business Economics (NABE) survey depicted the worst business conditions in the U.S. since the report's inception in 1982.
Among the cuts announced on Jan. 26:
Caterpillar, the world's largest maker of mining and construction equipment, announced 5,000 new layoffs on top of several earlier actions. The latest cuts of support and management employees will be made globally by the end of March. The company says it is in the process of shedding about 20,000 jobs. The company employs 112,000 worldwide.
Wireless phone carrier Sprint said it is eliminating about 8,000 positions in the first quarter as it seeks to cut annual costs by $1.2 billion. The layoffs will trim about 14% of Sprint Nextel's 56,000 employees. The company said it is also suspending its 401(k) match for the year, extending a freeze on salary increases, and suspending a tuition reimbursement program.
Pharmaceutical company Pfizer, which announced a deal to buy rival drugmaker Wyeth (WYE) for $68 billion, said it would cut 8,000 jobs. The cuts will begin in the first quarter and are to be complete by 2011, according to company spokesman Ray Kerins. Cuts will include most departments, from administration and sales to manufacturing and research.