The number of planned layoffs announced last year by U.S.-based employers declined to the lowest annual total since 1997, new data shows. Job cuts moved down for the second straight month in December and were 5% fewer than in 2013, adding to signs of a strengthening labor market.
Total layoffs in 2014 were 483,171, down 5% from 509,051 in 2013, according to a report released Thursday by placement firm Challenger, Gray & Christmas. It was the lowest annual total since 1997, when there were 434,350 job cuts. Layoffs announced in December declined 9.2% from 35,940 planned layoffs in November. Employers planned to layoff 32,640 workers in December 2014, which were still 7 percent higher than the 30,623 job cuts in December 2013.
“Layoffs aren’t simply at pre-recession levels; they are at pre-2001-recession levels,” John A. Challenger, chief executive of Challenger, Gray & Christmas. “This bodes well for job seekers, who will not only find more employment opportunities in 2015, but will enjoy increased job security once they are in those new positions.” That said, the U.S. typically records an average of 40,000 planned job cuts per month even in a period of economic and employment growth. “No job is ever 100% secure,” he adds.
Challenger’s report highlighted that while the economy and employment showed growth last year, job security remains a problem with employers recording an average of around 40,000 job cuts per month. The reason provided is that companies restructure their operations, take cost reduction initiatives or fire workers when mergers and acquisitions are completed.
Notably, the greatest number of layoffs was recorded in the tech sector, which is seen as a relatively strong performer in the economy. That sector declared 59,528 planned layoffs in 2014, representing a 69% increase from a year ago, according to the report. The greater part of that downsizing appeared because of plans announced by Hewlett-Packard and Microsoft to each cut thousands of jobs. Both companies are shifting their focus from traditional PC businesses to mobile devices with an aim to compete better with more streamlined operations.
Retail sector was ranked second in 2014 due to job cuts by Coca-Cola and Caterpillar. The group and saw a 11% decline in layoff. Health care sector was placed on third with fewer layoffs in 2014, Challenger said. Meanwhile, the biggest rise in layoffs occurred among employers in the entertainment industry and electronics, where downsizing in 2014 more than doubled for both.
“We expect downsizing to remain subdued in 2015, as a growing number of employers turn their attention toward job creation,” Challenger said.
The biggest possible threat seems declining oil prices as it could cause more layoffs in one of 2014’s star performers: the energy sector. The total number of layoffs announced by energy companies only totaled 14,262 in 2014. Therefore, Challenger highlighted a plan earlier this week that U.S. Steel would be laying off 756 employees as soft demand related to weak oil prices pushed it to shut a plant that makes specialized pipes for the energy industry.
“Lower prices mean less money for research, exploration and new drilling operations,” Challenger said. “However, the slowdown in oil-related industries may be more than offset by the extra dollars in consumers’ pockets as they shell out less money for gas and heating oil. The money not spent at the pump can be used for consumer goods, travel, home improvement, and dining out. Furthermore, continued low gas prices could spur an increase in SUV sales. All of these are going to have an immediate and positive impact on the job market and hiring.”
Still, official government data also provide signs of growing U.S. jobs market. Also Thursday, the Labor Department declared that Americans filing new claims for unemployment benefits dropped 4,000 to 294,000 as compared to Dec. 27 to Jan. 3. The figure stands below the much-watched 300,000 level for the 16th time in 17 weeks. Economists had predicted claims falling to 290,000 last week.
“In the 11 months through November, the economy had added more jobs than in any calendar year since 1999,” says Patrick O’Keefe, director of economic research at CohnReznick, an accounting and advisory firm.
Claims are “low enough to be consistent with very big payroll gains,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Inc. in White Plains, New York, said in a research note. “If the economy strengthens again in the first half, it could easily dip to new lows.”
As the labor market keeps growing, the Federal Reserve could move a step closer to lifting its short-term interest rate, which has been maintained near zero since December 2008.
The claims report disclosed total U.S. citizens still receiving benefits after an initial week of aid saw a rise of 101,000 to 2.45 million in the week ended Dec. 27. US 4-week moving average of initial claims for unemployment insurance fell by 17,000 to 2.40 million.
“The trend in claims has been fairly steady lately and sends a relatively upbeat message regarding conditions in the labor market,” said J.P. Morgan Chase economist Daniel Silver.