March 3 (Bloomberg) -- Employers in the U.S. last month announced the fewest job cuts in more than three years, a sign companies may be about to start increasing payrolls. Planned firings fell 77 percent in February to 42,090, the least since July 2006, from 186,350 a year earlier, according to data collected by the job placement firm Challenger, Gray & Christmas Inc. Announcements decreased from 71,482 in January.
“Employers have shifted away from downsizing and are poised to start adding workers,” John A. Challenger, chief executive officer of the Chicago-based firm, said in a statement today. “It may be a couple of more months before hiring begins to surge.”
Companies may be trying to retain existing staff after the world’s largest economy last quarter expanded at the fastest in six years. An end to the worst employment slump in the post- World War II era would help begin to mend consumer confidence, improving the prospect for spending this year.
The U.S. probably lost 55,000 jobs in February after a 20,000 drop a month earlier, according to the median estimate of economists surveyed by Bloomberg News before a Labor Department report on March 5. The unemployment rate may have increased to 9.8 percent from 9.7 percent, according to the survey.
Payrolls figures may have been hurt by blizzards in the Northeast and snowstorms in the South that caused some businesses to close, economists said.
Correlation to Employment
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 jobs 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.
Today’s report showed pharmaceutical companies, with 17,687 announced cuts, and government and non-profit agencies, with 4,628, led all industries in reductions last month.
Recent firings more likely resulted from changes in “strategy,” including mergers and shifts from one business area to another, than from economic concerns, Challenger said.
The total for pharmaceutical companies last month, for example, included Merck & Co.’s decision to cut jobs following its purchase of rival Schering-Plough Corp., Challenger said. The second-largest drugmaker said it will eliminate 15 percent of the combined company’s workforce, or 15,000 jobs, and cut 2,500 vacant positions by 2012.
‘Growth’ Opportunities
Job cuts such as these “are being made to put the company in the best position to take advantage of future growth opportunities,” Challenger said in the statement. “Twelve months ago, cuts were being made simply to keep the company afloat.”
Some other reports show that the labor market is stabilizing. The Institute for Supply Management’s manufacturing employment index rose in February to the highest level in five years.
General Motors Co. may fill most of the 5,500 jobs created by its $1.4 billion retooling of 18 U.S. factories with laid-off workers, Diana Tremblay, the automaker’s manufacturing and labor chief, said in an interview Feb. 23. The company’s 5,000 to 6,000 workers on indefinite layoff have first rights to any openings from the factory upgrades, including a third shift in Lordstown, Ohio, announced last week.
Other firms continue to trim employment. International Business Machines Corp., the world’s largest computer-services provider, fired more than 1,700 workers this week, mostly in the U.S., and that number may rise, an employee advocacy group said yesterday. The firings follow 10,400 job cuts in the U.S. and Canada last year, said Lee Conrad, national director of Alliance@IBM.
