BREAKING NEWS: April Decline in Payrolls Was Steepest Since February 1991

Another 50-basis point rate cut is almost certain now.
Stephen TaubMay 4, 2001

Jobs and job security.

Executives, employees and investors are all thinking about these issues as the steady drumbeat of layoffs is threatening to dash hopes that the stock market’s recent rebound is foreshadowing a bottoming of the economic slowdown.

On Friday morning, the Labor Department reported that the unemployment rate climbed to 4.5 percent in April. Analysts were looking for a 4.4 percent unemployment rate. This is the highest rate since October 1998.

Even more frightening, non-farm payrolls declined by 223,000 jobs. Economists polled by Reuters expected U.S. payrolls to add 5,000 jobs. This is the steepest one-month decline in payrolls since February 1991.

Average hourly wages climbed by 0.4 percent.

The news has quickly fueled speculation that the Federal Reserve will step up to the plate with another two rounds of 50-basis point rate cuts, one very soon, since this news could dampen consumer confidence and consumer spending.

The jobs-related news wasn’t good on Thursday either.

For example, first-time applications for state unemployment benefits rose to 421,000 for the week ended April 28, the highest level in more than five years.

In addition, on Thursday outplacement firm Challenger, Gray & Christmas said the number of corporate layoffs during April hit a record.

And, the National Association of Purchasing Management’s most recent non-manufacturing survey showed that the services sector will weaken in the coming months, causing more job cuts in an area of the economy which has so far avoided the steep decline.

Meanwhile, another round of major corporations announced significant layoffs. For example:

  • Newell Rubbermaid Inc. said it would cut 3,000 workers, or 6 percent of its employees, over the next three years in a plan to trim costs by more than $100 million a year.
  • Credit Suisse First Boston is planning to lay off 150 to 200 investment bankers as early as next week, according to the
  • Dell Computer Corp. will be “ruthless in how we address our cost structure going forward,” Tom Meredith, Dell’s senior vice president of business development and strategy, was widely quoted as having said at the Merrill Lynch Hardware Technology conference in New York.
  • General Motors Corp. offered white-collar employees with low seniority up to 15 months of salary in a lump sum if they choose to quit. GM is hoping to cut 6,000 white-collar jobs in North America under a restructuring announced in December. In order to be eligible to receive the 15 months of pay, an employee must be with GM for at least one year and not be eligible for GM’s current accelerated early retirement program. The early retirement program concludes July 1 and covers workers ranging in age from 55 to 61.
  • Genuity Inc. said it plans to cut 800 jobs, or about 14 percent of its combined full-time and contract work force.
  • Internet consulting firm Sapient Corp. said it would eliminate about 20 percent of its work force.

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