Layoffs continue, but housing market sees positive sign
WASHINGTON -- The latest round of layoffs and cost-cutting measures came Tuesday on the heels of tens of thousands of layoffs ordered by a slew of companies last week alone. However, in a positive sign for the housing market, an index that tracks signed contracts to purchase existing homes rebounded in December as buyers snapped up properties at deep discounts.
PNC Financial Services Group said it plans to cut 5,800 jobs. Airplane maker Hawker Beechcraft Corp. said 2,300 employees will lose their jobs before the end of the year and warned more layoffs may be coming. Liz Claiborne Inc. will eliminate 725 jobs, or 8 percent of its work force, an anouncement made a day after Macy's Inc. said it was axing 7,000 jobs, or 4 percent of its work force. King Pharmaceuticals Inc. will get rid of 520 jobs.
Military contractor and aerospace company Rockwell Collins Inc. is cutting 600 jobs and freezing salaries at last year's level for all executives and managers. UPS Inc. is freezing management pay and suspending its matching contributions to employees' 401(k) plans. And General Motors Corp. said it will offer buyouts to all of its hourly workers.
On the housing front, the National Association of Realtors said Tuesday its seasonally adjusted index of pending sales for previously owned homes for December rose 6.3 percent to 87.7 from an upwardly revised November reading of 82.5, which was lowest month on record. That's better than the 82.3 reading economists expected, according to a survey by Thomson Reuters.
The reading also was up 2.1 percent from December 2007.
After the stock market plummeted last fall, sales of existing homes fell in October and November, but recovered in December. Tuesday's pending home sales report indicates January sales data, to be released later this month, may look good, too.
While lower prices and lower mortgage rates appear to be boosting demand, the timing of a housing market turnaround is likely to depend on how far the overall economy sinks.
"Eventually, the positives will outweigh the negatives," said Pierre Ellis, senior economist with Decision Economics in New York. "Hopefully, that will be reasonably soon and we'll have the beginnings of a recovery."
With that recovery still to come, it has been increasingly difficult for the unemployed to find new jobs and some of those who still have jobs are losing ground in other ways. Employers are freezing or cutting pay, trimming hours, suspending matching contributions to 401(k)s and doing away with health care, bonuses or perks that were offered during better economic times.
"Businesses are slashing jobs in order to survive in the deepening economic downturn," said Mark Zandi, chief economist at Moody's Economy.com.
All told, economists, on average, estimate at least 524,000 more jobs vanished in January, and some think the figure will reach around 700,000. The unemployment rate -- now at 7.2 percent -- is expected to increase to 7.5 percent, a 17-year peak, in January when the government releases new figures Friday.
To help revive the economy and jump-start job creation, President Obama is pushing Congress to enact a stimulus package of increased government spending, including on big public works projects as well as tax cuts. The House passed an $819 billion package; the Senate is working on an $885 billion plan.
Obama has said his plan will save or create more than 3 million jobs over the next "few" years.
However, he said he's alarmed at how fast the U.S. economy has deteriorated and that worrying about it keeps him up at night. In a series of network television interviews, the president said the short-term outlook is bleak.
He told CNN that even three months ago, most economists would not have predicted the economy was "in as bad of a situation as we are in right now."
There is "no magic bullet," he told Fox News. But he said that working with Congress on his economic package, "we are closer to getting it right."
The Federal Reserve announced Tuesday that it is extending the life of key programs intended to relieve the credit and financial problems that have aggravated the recession. It will keep these programs, which had been slated to expire on April 30, running through the end of October.
The programs being extended include those that: provide emergency loans to investment firms; buy mounds of companies' short-term debt, known as "commercial paper;" bolster the mutual fund industry; and allow investment firms to temporarily swap risky securities for supersafe Treasury securities.
Looking ahead, economists predict up to 3 million jobs will disappear this year even if Congress quickly approves the stimulus package. The country lost a net total of 2.6 million jobs last year, the most since 1945, though the labor force has grown significantly since then.
The unemployment rate could hit 10 percent or higher later this year or early next year, under some analysts' projections.
Companies are slashing jobs and cutting costs because the steepening economic tailspin in the U.S. and overseas is sapping customer demand. Americans throttled back spending at the end of last year, thrusting the economy into its worst backslide in a quarter-century.
Another illustration of the collapse of big-ticket purchases came Tuesday with the release of monthly auto sales data that set a somber tone for the rest of the year.
U.S. auto sales at Chrysler plunged 55 percent in January, GM's sales tumbled 49 percent and Ford's dropped 40 percent, while Japanese rival Toyota's sales fell 32 percent and Honda's slid 28 percent. Subaru bucked the trend for a second straight month, posting an 8 percent sales increase, but the industry overall was on track for its fourth straight month in which U.S. sales slid 30 percent or more.
Many economists predict the current January-March quarter will be the worst of the recession, now in its second year. They predict the economy will shrink at a staggering rate of 5 percent or more as consumers and businesses hunker down further under the force of the worst housing, credit and financial crises to slam the nation since the 1930s.
Even under the best-case scenario, with the recession ending in the fall, the situation will be rocky. The economy is expected to remain quite weak this year and into 2010. Businesses will be in no mood to ramp up hiring or capital spending until they feel confident that any recovery will be lasting.
Meanwhile, a rush to buy foreclosed -- and deeply discounted -- properties is prompting more house hunters to sign contracts.
The National Association of Realtors' index of pending sales for previously owned homes rose 6.3 percent in December to 87.7. While that's a welcome dose of good news for the depressed housing market, home prices are expected to keep falling through 2009, another negative force that is likely to keep consumers in hibernation.