Employers in the U.S. announced the largest number of job cuts in July in 16 months, signaling a labor market that’s struggling to improve.
Planned firings climbed 59 percent from July 2010 to 66,414, according to figures released today by Chicago-based Challenger, Gray & Christmas Inc. Job-cut announcements were led by the pharmaceutical industry, which included drugmaker Merck & Co.’s plans to eliminate as many as 13,000 jobs.
The figures follow other data showing consumers retrenching, manufacturing cooling and confidence waning. Employers in July probably boosted payrolls at a pace that failed to reduce the jobless rate, according to a Bloomberg News survey before a report in two days.
“July marks the third consecutive increase we have seen in monthly job-cut announcements, which certainly seems to provide additional evidence that the recovery has stalled,” John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. “It has been a couple of years since we have seen this level of private-sector job cuts coming in a single month.”
Compared with June, job-cut announcements increased 60 percent. Because the figures aren’t adjusted for seasonal effects, economists prefer to focus on year-over-year changes rather than monthly numbers.
The pharmaceutical industry led the firings with 13,493 job cut announcements in July.
Cuts at Merck
Merck, the second-largest U.S. drugmaker, announced it would eliminate 12,000 to 13,000 jobs by 2015. The Whitehouse Station, New Jersey-based company is cutting costs, expanding in emerging markets and spending on research and development as it tries to gain momentum before losing patent exclusivity next year on its Singulair medicine for asthma.
Today’s report showed New Jersey led all states with 13,330 announced job cuts in July, followed by Michigan with 10,923.
Hiring plans eased in July from a month earlier, the report showed. Employers announced intentions to add 10,706 workers. While up from 8,151 in the same month last year, they were down from 15,498 in June.
Payrolls climbed by 85,000 workers in July, after a 18,000 increase in June that was the smallest in nine months, a Labor Department report is projected to show Aug. 5, according to the median forecast of economists surveyed by Bloomberg News. Economists forecast the unemployment rate will remain at 9.2 percent in July.
Consumer spending dropped in June for the first time in almost two years as a hiring slowdown caused consumers to retrench. Purchases fell 0.2 percent last month after a 0.1 percent gain the prior month, Commerce Department figures showed yesterday.
Slowing sales is one of the reasons San Jose, California-based Cisco Systems Inc., the largest networking-equipment maker, announced last month it plans to eliminate about 6,500 jobs. Goldman Sachs Inc. also announced it will cut about 1,000 jobs.
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 job 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.