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Announced U.S. Job Cuts Fell From Year Ago, Challenger Says

Labor market is improving, planned layoffs have dropped 65%. Photographer: Jeff Kowalsky/Bloomberg
Labor market is improving, planned layoffs have dropped 65%. Photographer: Jeff Kowalsky/Bloomberg

June 2 (Bloomberg) -- Job cuts announced by U.S. employers declined in May, indicating the labor market is improving.

Planned firings dropped 65 percent to 38,810 from 111,182 in May 2009, according to figures released today by Chicago-based Challenger, Gray & Christmas Inc.

Companies are retaining workers and starting to hire as they boost production and spending to meet improved demand in the U.S. and abroad. An improving labor market will help the economy withstand challenges posed by the European debt crisis and growing U.S. state and local budget deficits.

“Announced job cuts have, for all intents and purposes, returned to pre-recession levels,” John Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. “What makes the low job-cut totals we have seen this spring particularly remarkable is that we still have not reached what is the slowest downsizing period of the year, which typically occurs during the summer months.”

Challenger also said the pace of cuts probably won’t recede further “considering that the economy, while recovering, is still in a relatively fragile state.”

Hiring plans increased in May by 14,922 positions, led by financial firms and automotive companies, today’s report showed.

A Labor Department report June 4 will show the U.S. added 513,000 jobs in May, helped by a jump in hiring of temporary government workers to conduct the census, according to the median forecast in a Bloomberg News survey. The unemployment rate fell to 9.8 percent from 9.9 percent in April, according to the survey.

Attrition, Retirement

Challenger’s data do not always correlate with figures on payrolls or first-time jobless claims 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 many announced staff reductions never take place because business improves. The totals also include foreign affiliates.

The number of planned job cuts increased 1.3 percent in May from a four-year low of 38,326 in April, today’s report showed. The figures aren’t adjusted for seasonal effects, so economists prefer to focus on year-over-year changes rather than monthly numbers.

Government and non-profit organizations led in planned reductions last month, with 16,697. State and local governments, which have suffered a drop in tax collections as a result of fewer jobs and lower home prices, are under pressure to balance their budgets and have “no other choice but to make drastic cuts in public programs and the jobs that go with them,” Challenger said.

New York led all states with 18,960 announced job cuts, followed by California, with 4,920.

New York Governor David Paterson’s plan to furlough 100,000 state workers for one day a week was blocked again by a federal judge in Albany last month. Paterson made the proposal to help close a $9.2 billion deficit in the state budget that he put forward in February. The state has been operating under emergency appropriation measures that the governor has described as “bare bones.”

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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