Sept. 3 (Bloomberg) -- U.S. job cuts surged 12 percent last month from a year earlier as rising layoffs at automakers and the government overwhelmed a reduction in losses at financial firms, according to a report by a private placement firm.

Firing announcements increased to 88,736 last month from 79,459 in August 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today.

Companies are cutting staff as the housing recession and gasoline prices that topped $4 a gallon this summer weaken consumer spending and slow the broader economy. Job cuts were up almost a third in the last four months from a year earlier, and at the current pace they could exceed 1 million this year for the first time since 2005, Challenger said.

``We have not seen this level of summer job cutting since 2002, when the country was still struggling to recover in the wake of the 2001 recession and September 11,'' John A. Challenger, chief executive officer of the placement company, said in a statement. ``We do not expect downsizing to let up in the last four months of the year.''

On a monthly basis, the number of planned job cuts declined 14 percent from the 103,312 announced in July.

Financial Industry

Reductions at financial firms fell to 2,182, their lowest level in 13 months, Challenger said. Labor Department figures show that the industry's payrolls were unchanged in July after 39,000 cuts since January. The department will release its August employment report in two days.

Economists anticipate the government's job report will show the economy lost jobs in August for an eight consecutive month. The median estimate among forecasters surveyed by Bloomberg News is for a total loss of 75,000 in August, compared with 51,000 in July.

Companies have announced a total of 667,996 cuts so far this year, up 29 percent from the first eight months of 2007, according to today's Challenger report.

The figures aren't adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of monthly figures.

Automotive companies led industries in announced reductions in August, with 17,233. Cutbacks at government and non-profit organizations, totaling 12,328, followed. Retailers announced 9,874 cuts and industrial-goods makers announced 7,457 cutbacks.

GM Cuts

General Motors Corp., the largest U.S. automaker, is offering early-retirement incentives to about 9,000 U.S. salaried employees, or 28 percent of that workforce, people familiar with the plan said last week.

Delphi Corp., the bankrupt former parts unit of GM, said it will cut 600 salaried jobs in the U.S. as its sales to automakers decline, the Troy, Michigan-based company said on Aug. 18.

Year-to-date, the financial industry has been the hardest hit in the wake of the housing slump and spreading financial losses, accounting for 102,957 announced cutbacks, followed by the automotive industry, with 80,323 announced firings.

``We could also see more job cuts from the automotive industry,'' said Challenger. ``Retailers are probably looking at the weakest holiday sales season since 2001.''

The Challenger report does not always correlate with figures on first-time jobless claims or employment as reported by the government.

Many job cuts are carried out through attrition or early retirement. Some employees whose jobs are eliminated find work elsewhere in their companies, and some announced staff reductions never take place because business improves. Challenger's totals also include foreign affiliates.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net.

Last Updated: September 3, 2008 09:05 EDT