While at least some facets of headline unemployment data have shown improvement in recent months, pressures from Europe are beginning to work their magic on United States-based employers. This pressures are making it more and more difficult for the unemployment rate to head lower as we have seen in October's 7.9 percent rate. A recent release by Challenger, Gray and Christmas shows how job cuts are starting to impact American companies and how Europe is involved.
In the month of October, U.S.-based employers planned to cut 47,724 jobs, an increase of 41 percent over the previous month when job cuts of only 33,816 were planned. October's planned cuts are the highest since the month of May when 61,887 layoffs were announced. Looking back one year, this October's cuts are up 12 percent on a year-over-year basis. Reasons given for most of this October's job cuts are related to either restructuring (15,016 job cuts), closing (16,381 job cuts) and a downturn in demand (4,867 job cuts).
Through the first ten months of 2012, a total of 433,725 layoffs were announced, down 17 percent from the same ten months last year. Just in case you wondered, during all of 2009, there were 1,288,030 job cuts at American companies; this dropped to 529,973 in 2010, rising back to 606,082 in 2011.
Which three sectors are leading the surge in layoffs? Here they are in order:
1.) Automotive: This sector announced plans to layoff 11,615 workers, more than the total for the previous nine months of 2012. So far this year, the automotive sector has cut 22,020 workers, double the number of job cuts in this sector for all of 2011. The bulk of the cuts were at Ford Motor's plant in Belgium (9500 workers) and the United Kingdom (1400 workers) directly related to Europe's economic crisis.
2.) Consumer Products: This sector announced plans to lay off 5250 workers in October, up from only 1917 in September.
3.) Electronics Industry: This sector announced plans to lay off 4491 workers.
Here are the top five sectors in order of the number of layoffs in the first ten months of 2012 and a comparison to the number of layoffs in 2011:
Layoffs in the computer industry are up a whopping 238 percent on a year-over-year basis and transportation has seen a year-over-year increase of 176 percent. On the flip side, education has seen the number of laid-off workers drop by just under 40 percent on a year-over-year basis.
Just for fun, let's look at the number of job openings according to FRED:
In August 2012, there were 3.561 million job openings, just below the post-Great Recession high of 3.741 million seen in March 2012. This is up nicely from the recessional low of 2.186 million in July 2009 but is still well below the 4.0 to 4.7 million range in the three years prior to the Great Recession. This shows us that it is not a given that replacement jobs will be waiting for workers that are laid off in the United States.
While the a significant rise in the number of layoffs at U.S.-based companies are being experienced by employees that are located at overseas subsidiaries, it shows that American companies are becoming increasingly vulnerable to the "European Influenza". Other major American companies with global operations are also noting that weakness in Europe is translating to poorer than expected quarterly earnings, including DuPont, Colgate-Palmolive and Dow Chemical.
As the European debt problems lurch from crisis to crisis, it will be interesting to see how much of an impact there is on American workers as the seemingly never-ending issue works its way through the world's interconnected economy.