Latest job cuts renew concern for US economy

Jackie Sindrich

NEW YORK: A new wave of job cuts that has swept corporate America in recent

days has triggered concerns that consumer confidence could take another plunge,

threatening to prolong the US economic downturn.

On Wednesday, companies ranging across the economic landscape - from film and

imaging equipment maker Polaroid Corp. to food and consumer goods maker Sara Lee

Corp. to paper and wood products giant Georgia-Pacific Corp. - said they were

slashing jobs.

The new round of cuts follows a lull of a few weeks in which stock markets

began to regain some confidence after the massive job cuts announced mainly in

the technology and telecommunications industries in the first quarter. "The

second round of layoffs may put downward pressure on consumer confidence. I

think consumers will be a little harder pressed to be as optimistic about the

economy," said Steven Wood, chief economist at FinancialOxygen, a Walnut

Creek, California-based economic advisory firm.

Economists have said that a rebound in consumer confidence holds the key to

production recovery, and thus rehiring. But the recent surge in layoffs is

likely to wear further on confidence, delaying the turnaround. "Now it is

catching up to the service sector, and more retail-oriented businesses,"

Wood said.

On Wednesday, Polaroid said it was cutting its work force by 25 per cent, or

about 2,000 jobs over the next 18 months, as it attempts to lower its debt and

inch back into the black. Also on Wednesday, Georgia-Pacific said it will close

three plants and cut production at others, saying it would take a charge for

severance costs.

Semiconductor maker Integrated Device Technology Inc. said it would cut 900

jobs, or 18 per cent of its work force. Sara Lee said it would trim nearly 10

per cent of its headquarters staff, or some 30 jobs.

Firms "leaping at the opportunity" to cut jobs



On Tuesday, Avaya Inc. , the communications equipment maker spun off from Lucent
Technologies Inc., cut 3,000 jobs, or 11 per cent of its staff, because of

lower-than-expected sales. On Monday, DuPont Photomasks Inc., said on Monday

said it was cutting 120 jobs.

"With recent economic indicators suggesting weakness in some sectors,

companies that have had pent-up desire to make reductions in their general and

administrative work force are leaping at the opportunity," said Stephen

Unger, a managing partner at Heidrick and Struggles, the largest US executive

search firm.

Later this year, as the effect of lower interest rates and tax cuts kick in,

there could be some reacceleration, Wood said. "But I don't think that it

will be particularly robust," he said. Richard Wahlquist, vice president of

the American Staffing Association, said he sees the cutbacks as more of a

continuation of those in the first wave, rather than a new wave. He pointed out

that while the number of people filing new claims for unemployment benefits -

432,000 for week ending June 2 - are the highest level in eight and a half

years, the 4.4 per cent US unemployment rate is still one of the lowest rates in

the world.

"Consumers can have an artificially heightened sense of the economy and

the turnaround," he said in an interview. Paul Christopher, senior

economist with A G Edwards & Sons Inc., said that while it may indeed be a

new round of job cuts, it was already poised to subside.

"The thing to focus on is that it is fairly typical for the job market

to see its worst drubbing six months after the peak in inventory. That peak was

in October," Christopher said. That industry-wide job cuts have bled past

the six-month marker into May and June - though rarely is the economy so precise

- may signal an end in sight, he said.

(C) Reuters Limited 2001.