Challenger report: Pace of job cuts across U.S. slowing, ‘positive’ workforce setting

Employers announced plans to cut payrolls by 38,536 jobs in June, an increase from May, but still well below the 12-month average and indicative of a “positive employment environment,” according to a monthly report by global outplacement consultant Challenger, Gray & Christmas.

By region, Arkansas was listed as the largest job-cutter year-to-date and in the month of June across the South, although a Challenger spokeswoman admitted that those statistics were skewed because layoffs announced by Walmart Stores are not segmented out by state. According to the monthly report, Arkansas saw job losses of 1,500 in June and led the 12-state South region with 18,784 layoffs year to date.

“They are primarily from Walmart’s announcement that they were cutting 16,000 from stores in January and then another 1,500 in back office jobs in June,” said Challenger spokeswoman Colleen Blumenfeld. “We count by headquarter location unless we have a breakdown of locations at the time of tracking.”

Nationwide, the June job-cut total is 28% higher than May, when planned layoffs fell to a five-month low of 30,157. June job cuts were down 14% from the 44,842 planned job cuts reported by employers in June 2015.

“Job cut announcements were up last month, but they increased from the lowest total of the year to the second lowest of the year. The June total is 26 percent lower than the 53,049 monthly job cuts averaged over the past year,” said John Challenger, CEO of the global outplacement consulting firm.

Through the first half of the year, employers announced 313,754 planned job cuts, up 9% from the 287,672 job cuts announced in the first six months of 2015. However, pace of job cutting has slowed since the beginning of the year. Job cuts in the second quarter totaled 132,834, down 27% from the 180,920 first-quarter cuts and 10% lower than the 147,458 job cuts announced in the second quarter of 2015.

“It is not unusual to see a slowdown in job cuts during the summer months. Other factors are definitely contributing to the decline, the biggest one being the precipitous drop off in job cuts attributed to low oil prices,” said Challenger.

ENERGY SECTOR CUTS DECLINE
In the first quarter, firms in the energy and industrial goods sectors blamed oil prices for 50,053 announced job cuts. In the second quarter, oil-related job cuts declined 48% to 26,022. In the energy sector alone, job cuts declined 42% from 48,901 in the first quarter to 28,310 in the second quarter.

Sectors linked to oil were not the only ones to see a drop in job cuts. After announcing 31,832 job cuts in the first three months of 2016, retailers announced 48% fewer layoffs in the second quarter (10,263). Job cuts in the health care fell by 65% from 7,935 in Q1 to 2,798 in Q2.

“We may continue to see low job cut totals throughout the remainder of 2016, as employers take a wait-and-see stance on workforce levels. Several uncertainties, including national elections, the recent Brexit, and global security and economic issues are giving employers pause when it comes to workforce decisions. We are seeing it in layoff numbers, as well as the job creation numbers, which have been lackluster in recent months,” said Challenger.

Challenger said a year ago the second half of the year kicked off with more than 100,000 job cuts in July. “The surge was due primarily to massive cuts in troop and civilian jobs in the US military. We are unlikely to see similar government cuts in an election year,” he said.

TECH JOB CUTS
Not every sector is holding off on job cuts. Layoffs in the computer industry increased in the second quarter and total 39,589 through the first half of 2016, which is more than triple the 11,618 announced by these firms in the first six months of 2015.

“We have seen large scale job cuts from Intel and Dell this year, as well as, numerous smaller cuts from tech firms, including Seagate Technology, which announced 1,600 job cuts in June,” said Challenger. “The very nature of the technology sector means that these firms must remain agile and able to shift directions on a dime to meet constantly changing advances and changing consumer demands.”

The Challenger report also confirms recent Labor Department unemployment and workforce reports, which show that hiring is up and jobless rates are down over the last year in 333 of the nations 387 metropolitan areas. In May, Arkansas reported an all-time low unemployment rate of 3.8% as nearly 35,000 jobs were added to the state’s labor pool over the past year.

On Friday (July 8), the Labor Department’s Bureau of Labor Statistics will release the U.S. unemployment report for July, which will provide a snapshot of how the nation’s job market is holding up headed into the second half of 2016.

Last month, the U.S. jobless rate fell three-tenths of a point to pre-recession levels of 4.7%, but the market swoon because only 38,000 new jobs were added to payrolls.