Job Hunting

July Job Cuts Decline Sharply

But heavier job cuts are expected by year's end, warns Challenger.
Helen ShawAugust 1, 2006

Planned job cutbacks for the month of July dropped to a six-year low, putting this year on track to be the first year since 2000 with fewer than 1 million job cuts.

Employers announced 37,178 job reductions for July, a decline from 67,176 in June, according to a report issued by the outplacement firm Challenger, Gray and Christmas. A total of 481,536 job cuts have been announced through July, a 25 percent decrease from the 641,245 announced during the first seven months of 2005.

In 2006, the highest number of reductions came in January with 103,466 jobs eliminated. In 2005, employers announced a total of 1,072,054 job cuts. The last time cuts came in under 1 million was in 2000, when companies announced 613,960 reductions.

The low number of job cutbacks in July may be due to a seasonal effect, according to John Challenger, chief executive officer of Challenger, Gray and Christmas. “With the exception of 2005, the summer months typically are a time of low job-cut activity, due partly to the fact that many decision makers are vacationing and business in general slows,” Challenger said in a statement.

The low job reductions may not continue for the rest of the year, warned Challenger. “On average, the final four months of the year historically have seen the heaviest job cutting,” he said. “In our daily tracking, we have seen several warnings of heavier job cuts in the coming months.”

For example, Intel announced 1,000 job cuts in July and says it is reviewing all departments, noted Challenger. Additionally, Boeing has stated that it may close its Long Beach, California, plant which employs 5,500 workers, if the aircraft manufacturer does not receive new orders from the Air Force for C-17 cargo planes by mid-August.

In July, the biggest losses were in the industrial goods, diversified services, government/non-profit, consumer products and media industries. The sectors with the most job reductions this year are automotive (70,258 total job cuts), government/non-profit (51,628), industrial goods (42,651), food (34,149), and computer (32,882) industries.

Meanwhile, the largest sector with job growth is the military, which expects to create 22,000 jobs in the next five years at an engineering facility near Springfield, Virginia.

The monthly job-cut report by Challenger, Gray and Christmas has compiled news and corporate releases on U.S.-based employer announcements since 1993. Some reductions include employees who have taken early retirement offers or special considerations to leave the company.