The American economy may be improving but that has not deterred companies from laying off their staff, said the global outplacement consultancy, Challenger, Gray & Christmas on Thursday.
The job-cut report for the month of May showed companies were downsizing their operations by cutting jobs and firing the excess staff. This is unusual for the summer season, which traditionally observes lowest redundancy rate.
Employers announced plans to cut 38,810 jobs from their payrolls during the month, which was 1.3 per cent higher than the four-year low of job cuts announced in April. However, May layoffs were 65 per cent lower than the corresponding month last year.
"What makes the low job-cut totals this spring particularly remarkable is that we still have not reached what is the slowest downsizing period of the year, which typically occurs during the summer months," said chief executive officer of Challenger, Gray & Christmas, Inc John A. Challenger.
He added monthly job cuts might decline during the summer when businesses abstain from making dramatic staff changes.
Overall, the figures in May were consistent with year-long trend with both redundancy and announced job cut rates in 2010 falling below 2009 figures.
The holistic decline in retrenchments by companies are indicative of improvement in the American economy as well as private companies' revenue. The American GDP expanded at the rate of 3 percent during the first quarter of 2010.However, the survey highlighted higher job cuts by the government and non-profit sector.
The retrenchment figures announced by the government and non-profit companies was 12 percent more than in April.In total government had cut 93,470 jobs, two-and-a-half times more than pharmaceuticals, the second worst effected industry in the US.
"Unlike the private sector, which is beginning to see the fruits of recovery, the budget crisis for many states and municipalities is only getting worse," Challenger said. Also with many states to undergo election this year, politicians are reluctant to raise income taxes and sales taxes.
Besides, high unemployment and cautious house buying activity as a consequence to subprime mortgage crisis in 2007 along with government decision to inject money into fiscal stimulus plans have contributed to lower government revenue.
"This leaves them with no other choice but to make drastic cuts in public programs and the jobs that go with them," Challenger explained.
