Unemployment claims rose this week, and the Wall Street Journal profiles a recent surge in firing at major firms:
Companies are laying off employees at a level not seen in nearly a year, hobbling the job market and intensifying fears about the pace of the economic recovery.
Cisco Systems Inc., Lockheed Martin Corp. and troubled bookstore chain Borders Group Inc. are among those that have recently announced hefty cuts, while recent government numbers underscore how companies have shifted toward cutting jobs.
The increase in layoffs is a key reason why the U.S. recorded an average of only 21,500 new jobs over the past two months, far below the level needed to bring down unemployment, which now stands at 9.2%.
The cuts also reflect the shifting outlook of employers, many of whom had expected the economy to gain speed as the year progressed. Instead, growth has faltered. If the pace continues to disappoint, more companies will feel pressure to pull back. “Layoffs have played a big role [in weak job growth] over the last few months,” said Mike Montgomery, an economist at IHS Global Insight. “The soft patch is more layoffs and nothing else to pick up the slack.”
The trend is evident across several sectors. On Monday, following two straight quarters of lower profits, Cisco, the San Jose, Calif., networking-equipment giant, revealed plans to lay off 6,500 employees—about 9% of its staff. Goldman Sachs Group Inc., struggling with an unexpectedly steep decline in its trading business, said Tuesday that it is eliminating 1,000 jobs and indicated it may need to cut more.
Not discussed here are the massive cuts in public sector jobs that are ongoing, and the obvious solution–more fiscal stimulus to boost the still-sluggish economy.