ROCHESTER, N.Y. (July 22) - In a week where Alan Greenspan said he expected the U.S. economy to keep growing and Wall Street seemed generally pleased with corporate performance, workers at Eastman Kodak Co., Hewlett-Packard Co. and Kimberly-Clark Corp., among others, were warned about thousands of new layoffs.
But some economy watchers are suddenly concerned that this latest flurry of job cuts - a byproduct of various trends such as outsourcing, mergers, automation, changing technology and consumer demands - may foreshadow some trouble ahead.
"We won't know till afterwards, but I do think we may be seeing a tipping point in the economic cycle that these big layoffs are flagging," said John A. Carpenter, chief executive of Challenger, Gray & Christmas, a Chicago-based employment research firm. "I think it's a sign that leaks are breaking out."
One thing is for certain: It was not a good week for American labor. In fact, it's been an unusually torrid summer in terms of trimming payrolls.
U.S. corporations announced plans in June to cut 110,996 jobs - the highest monthly total in 17 months - and July's toll could turn out to be steeper. Overall job cuts are on the rise in 2005, reaching 538,274 through June, according to Challenger's monthly job-cut analysis.
Suffering its third straight quarterly loss, Kodak upped its job-slashing target by 10,000 on Wednesday from an earlier range of 12,000 to 15,000. By mid-2007, its worldwide payroll should level out below 50,000, one-third what it was in 1988.
Even as the picture-taking pioneer enjoys rapid gains in digital photography, it is struggling to cope with plummeting demand for conventional silver-halide film, its cash cow for the last century.
"We cannot keep bleeding year after year," Kodak's new chief executive, Antonio Perez, told analysts. "We need to establish an end point to this transformation, and we need to get there soon."
The same applies at Hewlett-Packard. The Palo Alto, Calif., computer and printer maker moved Tuesday to modify its pension benefits and eliminate 14,500 jobs, or nearly 10 percent of its work force, in a scramble to rein in bloated costs and combat efficient rivals.
Kimberly-Clark joined the job terminators Friday: The maker of Kleenex tissues and Huggies diapers plans to let 6,000 people go and sell or close as many as 20 plants. And Ford Motor Corp., which is already cutting 2,700 salaried workers this year, is mulling more aggressive measures.
In contrast, International Business Machines Corp.'s second-quarter earnings beat Wall Street's expectations, suggesting a rebound from its difficulties this spring when it targeted 14,500 job cuts, primarily in Europe.
So U.S. corporations are planning to cut another 110,000 jobs in June and July's cuts could be steeper. How long will this job cutting last? And isn't it ironic that while we're not only seeing these big job cuts coming, but also big corporate profits have been posted, making Wall Street happy? Continuing with the AOL story:
The Labor Department said the number of Americans filing new claims for unemployment benefits plunged 34,000 to 303,000 - the largest one-week improvement since December 2002. And while Greenspan cautioned that a big run-up in already high energy prices could throw a wrench into his forecast, the Federal Reserve Board chairman reiterated his bullish economic outlook.
"The economy," Challenger acknowledged, "has been very strong for the last year. We've seen over 2 million jobs created, we've seen unemployment drop to 5.0 percent, but I feel like we've probably hit the high water mark.
"We are beginning to see some of these icon companies topple a bit. It's not visible too much yet, but these are signs and suggest the next six months to a year are going to be tougher times for the economy."
So the Labor Dept. said the number of Americans filing new claims for unemployment have plunged by 34,000. I want to know how many of those Americans have used up their unemployment benefits, and have been dropped from the rolls? This economy is still in a wretching long-term structural change from a post-industrial to a service oriented economy. An even more scary scenario is that the U.S. economy will have to compete in a global labor market with a rising industrial and post-industrial economies of China and India--and both countries can offer highly educated labor services for a fraction of the labor costs to that of U.S. workers. This is also being felt in the labor market--especially as companies transfer high technology jobs and services from the U.S. to both China and India.
We are still in trouble.
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