Magazine article Workforce

Job Cuts Research Record Levels for 1998

Magazine article Workforce

Job Cuts Research Record Levels for 1998

Article excerpt

As 1998 came to a close, company after company announced job cuts. For example, MCI WorldCom announced it will lay off as much as 20 percent of its 75,000-employee workforce. Citigroup Inc. may cut as much as 6 percent of its workforce or 10,400 jobs due to the merger between Citicorp and Travelers Group Inc. Boeing says it will cut an additional 20,000 workers over the next two years, bringing the total reductions in Boeing's workforce to 48,000 jobs, or a 20 percent drop from the high level of 238,000 reached last June. And because of Exxon's purchase of Mobil to create the world's biggest company, 9,000 jobs worldwide will be lost.

There were 103,166 cuts in December alone. "The December figure is shocking, given the continuing strength of the economy," says John A. Challenger, chief executive officer of Chicago-based Challenger, Gray & Christmas Inc., an international outplacement firm that tracks job cuts daily. In total, U.S. corporations cut 677,795 jobs in 1998, making it the worst year of the decade for job cuts-10 percent above 1993's 615,186 cuts.

"Job cuts are clearly the result of the ongoing Asian economic crisis, the severe downturn in oil prices affecting producers as well as myriad oil services companies, and a weakening manufacturing sector as evidenced by purchasing managers' reports," Challenger adds. He indicates the industries that are cutting the most jobs are in electronics, industrial goods, computer, financial and consumer goods. These industries are being plagued by low oil prices and ongoing economic turmoil in Asia and Latin America. Other factors that have led to job cuts have been both the high number of mergers in 1998 and the roller coaster ride on Wall Street. Under pressure from investors and industry analysts to keep earnings and stock prices high, companies have continued to chop jobs.

Management analysts say economic pressure tends to cause business leaders to follow others in job cutting. When one company in their industry cuts jobs in an effort to keep profits high, others feel pressured to do the same. And because labor often accounts for nearly three-quarters of the cost of production, labor is usually the first thing managers eliminate in the budget.

But the strategy doesn't always work. "In my experience, many layoffs happen as a knee-jerk reaction in an effort to reduce costs or improve profits," says William G. Bliss, president of Bliss & Associates Inc. …

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