A week before Christmas, layoffs spreadby Multiple Authors on Dec. 17, 2008, under Edge
A growing number of companies are sending workers a grim holiday message: Head for the unemployment line.
Aetna Inc., Cooper Tire & Rubber Co. and Western Digital Corp. said Wednesday they would cut a combined 4,900 jobs. And Eastman Chemical Co. said it would cut an unspecified number as it tries to slash costs by $100 million in 2009.
The announcements came a day before the government is expected to report that jobless claims remain near their highest point in 26 years. Economists surveyed by Thomson Reuters project that 558,000 workers filed new claims last week.
The downturn has spread far beyond the housing and banking businesses where it began, battering workers in nearly every sector of the economy. Cooper Tire said Wednesday it would cut 1,400 jobs. Western Digital, which makes computer hard drives, said it plans to cut 2,500. Aetna, the third-largest U.S. health insurer, said it is cutting 1,000 jobs — 2.8 percent of its work force — to reduce costs and focus on growing areas.
The reports came one day after drug maker Bristol-Myers Squibb said it will eliminate 800 jobs by the end of this year.
“Things are changing so rapidly, and deteriorating so rapidly, that firms don’t have a choice,” said Nariman Behravesh, chief economist of IHS Global Insight. “It looks like the economy is in somewhat of a free fall.”
Falling sales are squeezing companies’ cash just as tighter credit makes it harder for them to borrow to fund operations, Behravesh said. The combination means this time, some companies can’t afford to wait until after the holidays to cut jobs.
Elizabeth Teschler, 22, was told Monday that she and the other part-timer at the five-person executive search firm where she’d worked for four months would be laid off. It was the second job loss in a year for Teschler, who graduated from Emerson College last December and has moved in with her family near Los Angeles to save money.
Unsure of how she’ll pay the $600 in student loans, credit card and car insurance bills each month, Teschler said she’s thinking of going back to school.
“I don’t know how I would pay for that, but at least it would postpone my student loans and be a way to acquire affordable health insurance,” she said.
Many people with jobs are so fearful about their employment security that families are reducing spending, giving retailers one of the worst holiday shopping seasons in decades.
Electronics retailer Best Buy Co. said this week that it faced “the most challenging consumer environment in its history” and would offer buyouts to all 4,000 of its headquarters employee.
“We believe that the environment for consumer spending is likely to get worse before it gets better,” said Chief Executive Brad Anderson.
“We need to prepare our organization to operate in a wide range of potential macroeconomic scenarios in the coming year,” he said.
Its rival Circuit City Stores Inc. filed for Chapter 11 bankruptcy protection last month. Retailer KB Toys filed for bankruptcy protection Thursday.
The recession that began last December could last though the third quarter of 2009, said Aaron Smith, a senior economist with Moody’s economy.com. Unemployment will likely continue to climb into early 2010, he said, even though the economy could start growing again in the fourth quarter next year.
“Businesses are hesitant to start hiring” after a deep downturn, Smith said. He estimated about 5 million jobs will be lost by the end of next year, with the unemployment rate reaching nearly 9 percent.
Last week, Bank of America Corp. said it expects to cut 30,000 to 35,000 jobs over the next three years as it faces a deteriorating economic environment and tries to absorb Merrill Lynch & Co.
Even companies that make escapist products that have weathered past recessions are feeling the pinch.
Midway Games Inc., maker of the popular “Mortal Kombat” video game series, said this week it will cut its head count by 180 people, or 25 percent of its work force, close a studio in Texas and halt development of “noncore” games.
Book publisher Macmillan said this week it’s eliminating 64 positions, nearly 4 percent of its work force. Las Vegas Sands Corp. has said it is cutting more than 200 workers from its Venetian and Palazzo casino hotels on the Las Vegas Strip as part of an effort to save $100 million annually. The cuts represent about 2 percent of its 10,000-person work force.
The unemployment rate rose to a 15-year high of 6.7 percent in November, and economists say it could exceed 8 percent before the downturn ends. About 10.3 million people are unemployed.
Every industry except education and health services shed jobs in November. More cuts are all but guaranteed, as companies that have made broad announcements about cutbacks release hard numbers.
Palm Inc. said in November it would cut $20 million in expenses by the fiscal fourth quarter, partly by reducing U.S. staff, though it has not said how many jobs will be lost. General Electric Co. has said it will significantly reduce its GE Capital business through job cuts, but has provided no more detail.
Delta Air Lines Inc. has said it will offer voluntary severance packages to the majority of the 75,000 employees of its combined operations with Northwest as it reduces its capacity by somewhere between 6 and 9 percent in 2009.
As sales and corporate tax revenue fall, even previously safe jobs in state and county government look shaky.
Faced with shortfalls, states around the country are wrestling with which cuts to make. Arizona and New Jersey are each facing budget shortfalls estimated at more than $1 billion for the fiscal year.
Kentucky has discussed closing some of its state parks if the economy gets worse. Vermont plans to close four highway rest stops, cutting the 10 “travel representatives” who staff the buildings from 7 a.m. to 11 p.m., doing everything from cleaning toilets to giving directions.
By Christopher Leonard, Ellen Simon