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April Job Cuts Hit Lowest Level Since December 2012

By Theresa Minton-Eversole  5/2/2013
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Job cuts fell to their lowest level since December 2012, as U.S. employers announced plans to trim payrolls by 38,121 in April, according to a report on downsizing activity released May 2, 2013, by global outplacement consultancy Challenger, Gray & Christmas Inc. April job cuts were 23 percent lower than in March, when announced layoffs totaled 49,255, and 6.0 percent lower than the 40,559 planned job cuts announced in April 2012.

Through the first four months of 2013, the pace of downsizing is virtually equal to a year ago.  Employers have announced 183,162 job cuts to date, which is a mere 0.27 percent lower than the 183,653 planned layoffs announced in the first four months of 2012.

“The economic slowdown that began late in the third quarter [of 2012] and [that] is expected to turn into another summer slump has yet to result in increased or widespread downsizing,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas, in a statement about the results.

Job growth is being reported, as well, albeit lackluster. Private-sector jobs increased by 119,000 from March to April 2013, according to the April National Employment Report from human capital management firm ADP. The report is based on ADP’s actual payroll data and measures the change in total nonfarm private employment each month on a seasonally adjusted basis. And the May hiring rate is expected to rise in the service and manufacturing sectors compared with a year ago, according to the Society for Human Resource Management’s (SHRM) Leading Indicators of National Employment (LINE) survey results, released May 2.

The U.S. Bureau of Labor Statistics (BLS) reported May 1 a net employment gain of 199,000 jobs in the private sector during the third quarter of 2012. In addition, unemployment rates were lower this March  than in March 2012 in 306 of the 372 metropolitan areas. The national unemployment rate in March was 7.6 percent, not seasonally adjusted, down from 8.4 percent a year earlier.

Retail saw the highest number of job cuts announced in April, 5,897, according to Challenger. Although that was down significantly from the 16,445 layoffs that retailers reported in March, retail job cuts are up 64 percent from a year ago for the first four months of 2013. These employers have cut 31,297 jobs, compared with 19,056 at the same point in 2012. 

Consumer Spending, Sequestration: Economic Drags

“The biggest concern is that consumers, who had been holding up the economy for so many months, are starting to scale back their spending as wages continue to stagnate,” Challenger said.

Consumer spending was up 0.2 percent in March, primarily due to increased heating costs during the unseasonably cold month. Spending in other categories—such as household goods, retail and restaurants—declined in March, according to the U.S. Commerce Department.

“Americans’ wages are not quite keeping pace with increased expenses,” said Challenger. “As a result, we are not going to see a big increase in consumer spending. It is just as unlikely that we will see a significant drop-off in spending.”

While retail was the top job-cutting sector of the month, the heaviest downsizing occurred in sectors that are not influenced by consumer spending. Health care, industrial goods, transportation, and aerospace and defense represented the remaining job-cut sectors in April, accounting for 13,766 job cuts, or 36 percent of the monthly total. Aerospace and defense firms announced 2,927 cuts last month, more than 65 percent of which (1,928) were attributed to federal spending cuts or concerns over sequestration.

“Most private-sector firms have not been directly impacted by sequestration yet [because of] the fact that government contracts are typically assigned well in advance and may be months or years away from completion. However, as we can see by early job-cutting activity, companies are already taking steps to address the impact of future spending cuts,” said Challenger.

The pharmaceutical industry is another sector that must constantly look ahead and adjust workforce levels, noted Challenger.  Last month drug manufacturers announced 1,517 job cuts, bringing the year-to-date total to 4,702.

“Many of these workforce reductions are related to the fact that drugmakers have products that will soon lose their patent protection and enter the generic market,” he said.  “While they may have other products in the pipeline, most companies are not going to continue to support an idle sales force during the lag time.”

Theresa Minton-Eversole is an online editor/manager for SHRM.

Related Articles:

Service-Sector, Manufacturing Hiring Expected to Continue in May, SHRM Online Staffing Management, May 2013

Manufacturing an Economic Recovery, SHRM Online Staffing Management, May 2013

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