5 Signs Unemployment Will Rise Again Soon

Numerous layoffs could cast a shadow over headline jobless rate

   
5 Signs Unemployment Will Rise Again Soon

A lot of people were trumpeting the news that headline unemployment rates nationwide dipped to the lowest level in three years this past January. That is good news, no doubt about it — even if the 8.3% rate isn’t as low as we would like to see it. As long as the rate is dropping, there is cause for optimism.

However, let’s not set off the fireworks just yet. There are serious signs that layoffs could be on the rise again and that our improvement in the unemployment rate could be counteracted soon.

For starters, 53,486 in planned job cuts this January marked the largest layoff tally since September and represented a 39% surge in job cuts compared with the previous year. That’s according to outplacement company Challenger, Gray & Christmas.

What’s more, the recent drumbeat of cutbacks seems to be increasing across all industries — consumer brands, airlines, drugmakers and banks.

This is not to say the economy is in for a “double dip,” or that the jobless rate will crest 10% once more. But for those folks who think the economy has definitively turned the corner, here are some unfortunate reminders that we might be in store for more trouble in the job market:

8,700 Layoffs at Pepsi: Soft drink giant PepsiCo (NYSE:PEP) announced recently that it will be cutting 8,700 jobs from its work force. The Pepsi job cuts amount to 3% of the global work force, but you can bet that since its top rival Coca-Cola (NYSE:KO) has been pushing aggressively into overseas markets, Pepsi isn’t going to take its foot off the gas abroad. Expect the lion’s share of those losses to come at home, in the United States.

13,000 Layoffs at American Airlines: Parent AMR Corp. (PINK:AAMRQ) recently announced a huge job cuts for American Airlines. The company said it wants to reduce labor costs by $1.25 billion a year, or about 20%. Admittedly, the carrier needs to do something since AMR declared bankruptcy in November, but that’s cold comfort to the employees who will be getting pink slips.

2,000 Layoffs at Novartis: This big pharma cutback isn’t as deep as some of the other cuts on this list, but it still is part of a disturbing trend. Novartis (NYSE:NVS) made a targeted reduction to staffers that work on its Diovan blood-pressure medication. As Diovan goes off patent protection, sales will slump, and NVS is going to cut back as a result. Expect this trend to continue across pharmaceutical companies as more blockbuster drugs go “off patent.” AstraZeneca (NYSE:AZN), for instance, announced 7,300 cuts — but luckily, it is headquartered in London, so Americans might be spared most of those layoffs.

1,600 Layoffs (and counting) at Morgan Stanley: Again, here we have a relatively small cut with big implications. Morgan Stanley (NYSE:MS) just cut 1,600 jobs in the past few months — but reports indicate another round of Morgan Stanley layoffs is in the works. This is after some 60,000 job cuts across big banks in 2011, and a steady drumbeat of smaller compensation for bankers. Sure, many Americans feel little sympathy for Wall Street fat cats … but let’s not get too gleeful about the fact that the financial sector continues to put people out of work as it struggles.

2,160 Layoffs at Boeing: It was big news in January when we learned Boeing (NYSE:BA) will pull out of Wichita entirely by 2013, leaving more than 2,160 workers without jobs and quitting the Kansas town it has called home since the 1920s. Defenders might say that Boeing is in fact creating jobs right now too, with a new facility in South Carolina opening up. However, that site is the subject of a legal battle because of complaints that Boeing moved operations just to bust its union and keep wages low. Even if some jobs are created, they aren’t going to be as well-paying as union positions.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace??.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.


Article printed from InvestorPlace Media, http://investorplace.com/2012/02/5-signs-unemployment-will-rise-again-soon/.

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