BOSTON (Reuters) - Shock waves from the global financial crisis are now being felt in almost every corner of working America as companies press the eject button on increasing numbers of employees.
While the ax has been falling for months in the financial and home-building industries — where the current economic downturn started — as well as the Detroit auto industry, makers of everything from soft drinks to water filtration systems have unveiled hefty rounds of job cuts in recent weeks as they brace for what some predict could become a long and deep recession.
In the past week alone, companies including PepsiCo Inc and Danaher Corp said they would lay off thousands of workers, while the state of Massachusetts disclosed plans to cut its payroll by 1,000 as it faces a tax shortfall.
The situation is poised to worsen as the holidays approach and many businesses scrutinize budgets for the coming year. The sad truth is that Christmas layoffs are common in tough times.
“It’s a fairly grim outlook,” said Michael Goodman, director of economic and public policy research at the Donahue Institute of the University of Massachusetts. “I don’t know of any sector of the economy that will be spared.”
A four-week moving average of new U.S. government jobless claims last week hit its highest point in seven years.
Ed Yardeni, chief investment strategist for Yardeni Research, is hoping that the U.S. government’s $700 billion bailout package will slow the job cuts.
“If this rescue plan doesn’t work, then... you could see something much worse that could feel like a recession or a depression, with all sorts of people losing jobs,” Yardeni said.
A survey of more than 100 chief financial officers and other senior executives — conducted Wednesday — found 56 percent expect to reduce payrolls over the coming year. A majority polled by CFO Magazine also predicted falling revenues and plan to cut operating costs by at least 5 percent.
Workers are scared. Some 47 percent polled last month by Workplace Options said news of the financial crisis made them fearful about job security, and 25 percent said they had begun scanning help-wanted ads or updating their resumes.
“I’m being more conservative about spending — I’m concerned,” said Donald Gaunt, a 52-year-old construction worker from Smithville, Rhode Island, who said he has enough work to last through the end of this year but wasn’t sure about 2009. “It hasn’t been this bad since the early 1980s.”
Workers in the financial sector, as well as those involved in home building and at the struggling Detroit automakers, have already been hit by round after round of layoffs.
The failure of investment banks Lehman Brothers Holdings Inc and Bear Stearns Cos resulted in tens of thousands of people losing their jobs, but even banks that have survived the crisis, including Bank of America Corp and Citigroup, have cut head count dramatically.
General Motors Corp said this week that it would close plants in Michigan, Wisconsin and Delaware and cut more than 4,000 jobs.
The cuts are spreading into other sectors:
* PepsiCo on Tuesday said it would cut 3,300 jobs, almost 2 percent of its work force, in a bid to cut costs.
* Danaher, which also makes Craftsman tools, said on Thursday it would lay off 1,000 workers and close 12 plants.
* Rockwell Automation Inc said it would lay off about 3 percent of its staff, or 600 people. That news came on September 30, the last day of the U.S. manufacturer’s fiscal year.
* Textron Inc, the world’s largest maker of corporate jets, said an unspecified number of jobs would be cut as it scales back its financial operation.
* Leggett & Platt Inc, which makes bed springs and store shelving, said it was cutting back hours at some factories and, in the words of Chief Executive Dave Haffner, “must move to reduce staff. We are already doing so.” It did not disclose the number of jobs it plans to eliminate.
Temporary employment may also prove harder to find. Consumer electronics retailer Best Buy Co, which normally bulks up staffing in the holiday season, plans to cut seasonal hiring by as many as 10,000 workers this year after hiring about 26,000 in 2007.
“When we see job losses and rising unemployment, this does not just affect those who lost their job,” said Lawrence Mishel, president of the partly labor-funded Economic Policy Institute think tank.
“Wages grow more slowly when there’s higher unemployment, so the downturn will be affecting most working families through reduced hours of work,” said Mishel. “This is not something that affects a small part of the workforce.”
With the pace of layoffs picking up, the cycle becomes a vicious one, pressuring consumer spending and hurting home values yet again.
“As people lose their jobs, they cut back on their consumption, and people are less able to afford their mortgages, which are already strained,” said Ron Blackwell, chief economist at the AFL-CIO, the largest U.S. labor federation. “And so people lose their houses, which continues to aggravate the financial problems. So it’s reinforcing in that way and it’s also spreading.
“This recession — and I didn’t see it this way a month ago — is going to be global in scope,” Blackwell said.
Additional reporting by Nick Zieminski in New York; Editing by Brian Moss