Announced U.S. Job Cuts Rose 20% From Year Ago, Challenger Says

U.S. President Barack Obama
While touring an Intel Corp. semiconductor manufacturing facility in Hillsboro, Oregon, last month, President Barack Obama said the U.S. must foster a business climate that encourages job creation. Photographer: Kevin P. Casey/Bloomberg

Employers in the U.S. announced more job cuts in February than in the same month last year, led by a surge at government agencies.

Planned firings increased 20 percent to 50,702 last month from February 2010, the first year-over-year gain since May 2009, according to a report today from Chicago-based Challenger, Gray & Christmas Inc. Announcements at federal, state and local government offices almost tripled from last year.

“More job cuts at the federal level are expected in the months ahead as pressure mounts to cut costs and rein in the soaring national debt,” John A. Challenger, the outplacement company’s chief executive officer, said in a statement.

Dismissals of government workers may contribute to a slowdown in consumer spending, which accounts for 70 percent of the economy. Combined with the highest gasoline prices in two years, the threat of a pause in purchases may already be causing retailers, which had the second-biggest number of announcements last month, to pare payrolls, said Challenger.

“If gasoline tops $4 per gallon in the coming weeks, consumers may be forced to make significant changes to their spending habits,” said Challenger. “At this stage of the recovery, that could be an extremely damaging setback.”

Compared with last month, which saw the fewest firings for any January since record-keeping began in 1993, job-cut announcements climbed 32 percent. Because the figures aren’t adjusted for seasonal effects, economists prefer to focus on year-over-year changes rather than monthly numbers.

Government Firings

Government and non-profit agencies led the February job cuts with 16,380 announced reductions, according to Challenger. Retail firms had 8,360.

Michigan led all states with 6,381 announced job cuts, followed by the District of Columbia, with 5,946.

Today’s report also showed that employers announced plans in February to hire 72,581 workers, up from 29,492 the prior month. The surge reflects Home Depot Inc.’s announcement that it planned to add 60,000 temporary workers, Challenger said.

While touring an Intel Corp. semiconductor manufacturing facility in Hillsboro, Oregon, last month, President Barack Obama said the U.S. must foster a business climate that encourages job creation and assures companies can draw on an educated workforce.

“In a world that is more competitive than ever before, it’s our job to make sure that America is the best place on earth to do business,” Obama said Feb. 18 at the factory.

Hiring Plans

Intel, the world’s largest chipmaker, announced plans during Obama’s visit to build a $5 billion microprocessor plant in Arizona and hire 4,000 employees in the U.S. this year.

Employers hired 193,000 workers in February, and the unemployment rate rose to 9.1 percent, according to the median estimate of economists in a Bloomberg News survey ahead of a March 4 employment report from the Labor Department.

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.

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