Massive corporate layoffs took center stage Wednesday as Lucent Technologies Inc. and Sara Lee Corp. said they would eliminate thousands of jobs.
Lucent, the New Jersey-based communications equipment-maker, said it will cut 16,000 jobs, including about 1,000 in the Chicago area. The Lucent cuts come on top of 7,000 worldwide layoffs by Chicago’s Sara Lee. Newly formed media giant AOL Time Warner Inc. said it will eliminate 2,000 positions.
The job losses announced Wednesday reflect an ominous trend toward more and bigger layoffs, especially by manufacturers. In the Chicago area, companies ranging from Motorola Inc. and Montgomery Ward & Co. to Brach’s candy and MarchFirst Inc., an internet consulting firm, have unveiled big cuts recently. Unemployment in the state, although still moderate by historical standards, has reached its highest level in nearly four years.
On a national basis, the slowing economy, poor performances by individual companies and an uptick in corporate consolidation all contribute to the trend. And some experts attribute the spike in layoffs partly to corporate managers who are racing to cut costs in anticipation of a financial downturn.
Even so, by many measures the economy is holding up well despite the job losses, according to David Wyss, chief economist at Standard & Poor’s. Economic growth has shifted into lower gear, Wyss said, but he also said he does not foresee a recession as yet.
All during the economic boom, Wyss said, many companies were laying off workers to become more efficient. Those workers dropped from payrolls to increase productivity were generally successful in getting jobs elsewhere, although some–especially more senior workers–obviously had to be content with lower pay, Wyss said. “Some might be greeters at Wal-Mart,” he said.
Yet finding another job might not be so easy if the economy weakens further, noted Jared Bernstein, economist at the Economic Policy Institute in Washington.
In the first quarter of 2000, the economy was adding 240,000 private sector jobs each month, he said. But in the last quarter, job growth had fallen off to 84,000 jobs a month.
“This is not a monthly blip,” Bernstein said. “We see clear slowing in the rate of job growth.”
Wall Street and many economic analysts expect the Federal Reserve once again will cut interest rates next week to combat a possible recession. Barry Bosworth, economist at the Brookings Institution, said he doesn’t think lower interest rates are needed to stimulate economic growth, but many other analysts do.
Bosworth said the Lucent layoffs reveal less about the national economy than about, as he put it, a “highly overvalued high-tech company that is going through a significant adjustment.”
Highly skilled Lucent workers will have little trouble finding new jobs, he predicted, though workers at AOL Time Warner, who labor in the hard hit “dot-com” sector, could have more trouble.
Lucent said it must cull its payroll to stem losses that reached $1 billion in the final three months of last year. The world’s largest telecommunications equipment maker was hit hard by a drop in sales of its telephone products.
Lucent is both an old economy manufacturer and a new economy high-tech telecommunications company. That makes it doubly vulnerable when manufacturing slows and companies like AT&T put off new purchases of equipment.
Lucent employs 10,000 people at its eight-building campus on adjoining tracts in Lisle and Naperville, the greatest concentration of the company’s 123,000 workers. Lucent employees there work in research and development, technical support and other mostly white-collar positions. Lucent does no manufacturing in Illinois.
The company said it will shed unneeded workers through a combination of attrition, layoffs and outsourcing of manufacturing work.
Lucent blamed “the industrywide slowdown in capital spending, softening of the [competitive telephone] market, [and] lower software sales” for the decline.
Sara Lee, meantime, a Chicago-based conglomerate with products ranging from frozen pies to women’s underwear, also is suffering from a slowdown in the economy.
The company blamed weaker U.S. retail sales for its 1 percent decline in operating income during the final three months of 2000.
The job losses at Lucent and Sara Lee amount to what labor statisticians describe as a “mass layoff”–one that involves 50 or more jobs from a single employer. Cutbacks on that scale are becoming increasingly common across the state.
In November, for instance, Illinois had 70 mass layoffs, up from 47 in the same month a year earlier, according to Paul LaPorte, an economist with the federal Bureau of Labor Statistics.
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On top of that, the layoffs are becoming more massive by involving more workers.
In November, 16,000 people filed unemployment claims after mass layoffs. For the same month a year earlier, the number was 5,400. December figures are not yet available.
To be sure, the layoffs cut across different industries.
In recent months, Chicago-based Montgomery Ward announced it would shut down, eliminating 28,000 jobs because of poor sales. Brach’s Confections Inc. will fire 1,100 workers at its West Side candy plant as the company exits manufacturing. MarchFirst has announced layoffs totaling 1,750 because of the collapse of the dot-com bubble.
The upshot: a state unemployment rate of 4.8 percent as of last month, the poorest showing since early 1997. Worst hit were Decatur, the Illinois section of the St. Louis metro area, Peoria and Rockford.
Although the Illinois Department of Employment Security attributed the increase in jobless rates largely to temporary layoffs in manufacturing, a significant share of the layoffs were permanent.
Motorola, for example, plans to permanently lay off 2,500 workers who build cell phones at its plant in the McHenry County community of Harvard.
The decline in manufacturing in Illinois reflects a national trend that shows no sign of slowing, though it was masked until recently by the nation’s buoyant economy. Overall, nearly 180,000 factory jobs were lost in 2000, and factory job losses have totaled 580,000 since the most recent peak in manufacturing employment in April 1998.