Job Cuts Remain Low--Challenger Report

Here is the monthly report from Challenger, Gray, & Christmas which tracks corporate layoffs. They reported that in September announced job cuts totaled 37,151 and was 44% lower than in September 2009. So far this year, companies have announced layoffs of 411,272, which is down 64% year over year. So while it is encouraging that corporations are not starting to layoff more workers, they seem unwilling to hire any new people. This is why we have seen an increase in temporary hirings. From the report:
The pace of downsizing remained virtually unchanged in September as employers announced plans to cut 37,151 jobs during the month; a seven percent increase from the 34,768 job cuts reported in August.

The September figure is the second lowest of the year and comes on the heels of the lowest monthly job-cut total since June 2000 (17,241), according to the report released Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc. Last month’s total was 44 percent lower than the 66,404 job cuts announced in September 2009. For the quarter ending September 30, planned layoffs totaled 113,595, 53 percent fewer than the 240,333 job cuts announced the same period a year ago. The July-September total was 2.5 percent lower than the 116,494 cuts announced in the previous quarter, replacing it as the lowest quarterly job-cut total since the second quarter of 2000 (81,568).

"Meanwhile, employers in the private sector have the cash to spend on new equipment and employees, but are waiting for demand to increase enough to warrant the investment,” John Challenger said.

Chart below shows the 12 month moving average of job cuts by companies.

I think the last sentence is the key to the whole unemployment problem in America. There is weak end user demand. The only reason the economy bounced at all was because of inventory rebuilding. Corporations know this and do not want to commit to permanent hirings until they see real demand start to pick up. Unfortunately, it is hard to see how demand will increase in the short term, especially as the "stimulus package" winds down. Unemployment is going to remain high for years and there is nothing the Fed can do about it.

Black Swan Insights

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