Announced U.S. Job Cuts Jumped 59% in July

Aug. 3 (Bloomberg) -- Employers in the U.S. announced the
largest number of job cuts in July in 16 months, signaling a
labor market that’s struggling to improve.
    Planned firings climbed 59 percent from July 2010 to
66,414, according to figures released today by Chicago-based
Challenger, Gray & Christmas Inc. Job-cut announcements were led
by the pharmaceutical industry, which included drugmaker Merck &
Co.’s plans to eliminate as many as 13,000 jobs.
    The figures follow other data showing consumers
retrenching, manufacturing cooling and confidence waning.
Employers in July probably boosted payrolls at a pace that
failed to reduce the jobless rate, according to a Bloomberg News
survey before a report in two days.
    “July marks the third consecutive increase we have seen in
monthly job-cut announcements, which certainly seems to provide
additional evidence that the recovery has stalled,” John A.
Challenger, chief executive officer of Challenger, Gray &
Christmas, said in a statement. “It has been a couple of years
since we have seen this level of private-sector job cuts coming
in a single month.”
    Compared with June, job-cut announcements increased 60
percent. Because the figures aren’t adjusted for seasonal
effects, economists prefer to focus on year-over-year changes
rather than monthly numbers.
    The pharmaceutical industry led the firings with 13,493 job
cut announcements in July.

                     Cuts at Merck

    Merck, the second-largest U.S. drugmaker, announced it
would eliminate 12,000 to 13,000 jobs by 2015. The Whitehouse
Station, New Jersey-based company is cutting costs, expanding in
emerging markets and spending on research and development as it
tries to gain momentum before losing patent exclusivity next
year on its Singulair medicine for asthma.
    Today’s report showed New Jersey led all states with 13,330
announced job cuts in July, followed by Michigan with 10,923.
    Hiring plans eased in July from a month earlier, the report
showed. Employers announced intentions to add 10,706 workers.
While up from 8,151 in the same month last year, they were down
from 15,498 in June.
    Payrolls climbed by 85,000 workers in July, after a 18,000
increase in June that was the smallest in nine months, a Labor
Department report is projected to show Aug. 5, according to the
median forecast of economists surveyed by Bloomberg News.
Economists forecast the unemployment rate will remain at 9.2
percent in July.

                     Consumer Spending

    Consumer spending dropped in June for the first time in
almost two years as a hiring slowdown caused consumers to
retrench. Purchases fell 0.2 percent last month after a 0.1
percent gain the prior month, Commerce Department figures showed
yesterday.
    Slowing sales is one of the reasons San Jose, California-
based Cisco Systems Inc., the largest networking-equipment
maker, announced last month it plans to eliminate about 6,500
jobs. Goldman Sachs Inc. also announced it will cut about 1,000
jobs.
    Challenger’s data do not always correlate with figures on
payrolls or first-time jobless claims as reported by the
government. Many job cuts are carried out through attrition or
early retirement. Some employees whose job are eliminated find
work elsewhere in their companies and many announced staff
reductions never take place because business improves. The
totals also include foreign affiliates.