When the dot-com and housing bubbles burst, it was easy to see what types of jobs would disappear. But these days as nervous lenders cower and credit contracts, virtually every industry is likely to be scathed in the widely predicted downturn starting this autumn. Nearly every business relies on credit to operate — just as they need customers to have spending power.
With lending trimmed, and companies and consumers tightening their belts, jobs will be cut across broad swaths of the economy, from the tech sector to investment banking, and from manufacturing to soft drinks.
The four-week moving average of U.S. jobless claims hit its highest point in seven years, the Labor Dept. reported on Oct. 20. The average number of new jobless claims rose to 483,250 for the week ended Oct. 11, the highest since 2001. September's unemployment rate was unchanged at 6.1 percent, but economists generally predict the labor picture will deteriorate in coming months.
"This is an equal-opportunity recession," says Cathy Paige, a vice-president of Manpower, a temporary staffing firm that is experiencing softening demand from clients. "Everyone is feeling it."
In any industry, the workers most vulnerable to layoffs are "bottom performers," says Nancy Albertini, chairman of Albertini Group, an executive search firm based in Dallas. "Companies will say, 'We've been meaning to eliminate these,'" she says. After trimming poor performers, companies will cut in areas not considered essential to operations, such as marketing, communications, and human resources. After these categories, any position is fair game, Albertini says, depending on the industry. What started in the financial sector with the failures of Bear Stearnsand then Lehman Brothers, is spreading to other industries. Housing, sure, but technology is no longer immune, and consumer brands have begun culling employee ranks.
Silicon Valley has already made a wave of announcements. Yahoo is expected to announce job cuts this week, possibly on Oct. 21 when the company releases its quarterly earnings report. Yahoo eliminated 1,000 positions in January. Earlier this month, eBay announced it was laying off 10 percent of its 16,000 workers. Last month, Hewlett-Packard announced it would lay off 24,600 workers over the next three years, though it plans to hire another 12,300 as part of its restructuring since purchasing Electronic Data Systems in August. Meanwhile, Google has been trimming its contractor workforce but expanding in other areas.
Online real estate companies, which have been experiencing growth as home prices decline, say they're forced to cut staff as well. The real estate valuation Web site Zillow announced on Oct. 17 it would cut 25 of its workforce, or 40 positions, citing the recession's impact. "One of the reasons this is so difficult is simply because the business continues to grow," said Rich Barton, Zillow's CEO, in a note posted on the company's Web site.
On Oct. 13, Redfin, an online real estate brokerage, announced a 20 percent staff reduction as business turned south this month. "October will still be pretty good, then we're headed for a big dip," Redfin President and CEO Glenn Kelman wrote on the Seattle company's blog.
While discount retailers like Wal-Mart Stores may ride out the holiday season, specialty stores may not fare as well as consumers facing job losses and lower home equity cut back. Long-ailing Circuit City is weighing job cuts and the closing of 150 stores to conserve cash, The Wall Street Journal reported on Oct. 20.
A Circuit City spokesman declined to comment on what he called "rumors." Rival consumer-electronics retailer Best Buy, which normally adds staff during holiday season, plans to cut seasonal hiring by as many as 10,000 workers this year. Entertainment is also trimming its workforce; Playboy Enterprises announced Oct. 15 it would close its DVD division, resulting in the loss of 80 jobs.
Consumers are also cutting back on essentials like food products. On Oct. 14, PepsiCo, the world's largest snack maker, said it will cut 3,300 jobs after third-quarter profit declines; the company also lowered its forecast for the rest of the year. It's closing as many as six plants and cutting back "overlapping" marketing and sales jobs, Chief Financial Officer Richard Goodman said on a call with analysts. PepsiCo shares are off 25 percent so far this year.
Industrial and manufacturing firms are also cutting back. Smurfit-Stone Container, which makes container board and corrugated packaging, announced on Oct. 20 that it will shut down a pulp mill in Quebec by the end of the month, resulting in the loss of 218 jobs. Danaher, the maker of Craftsman tools, is closing a dozen plants and laying off 1,000 workers. General Motors has said it will close plants in Michigan, Wisconsin, and Delaware and cut more than 4,000 jobs. More could be on the way if the company completes a deal to acquire Chrysler.
Are there any bright spots on the jobs horizon? "If there are any bulwarks, we can look to health care and energy," says John Challenger, CEO of Chicago outplacement firm Challenger, Gray & Christmas. "Demand won't dissipate." But he says even the outlook for those industries will depend on the effectiveness of various governments' efforts to bolster the economy. In any case, says Challenger, "it's going to get worse before it gets better."