Sun, Jul 24, 2005 - Page 11 News List

Flurry of job cuts spark concern about US economy

LAYOFFS Analysts are seeing trouble ahead after thousands of workers at firms like Eastman Kodak, HP, Kimberly-Clark and Ford were warned they could lose their jobs


In a week where US Federal Reserve chairman Alan Greenspan said he expected the US economy to keep growing and Wall Street seemed generally pleased with corporate performance, workers at Eastman Kodak Co, Hewlett-Packard Co and Kimberly-Clark Corp, among others, were warned about thousands of new layoffs.

"You get immune to it after a while," longtime Kodak technician John Hladis said with barely a shrug when the scythe fell once more at the Rochester-based photography company, slicing away another 10,000 employees.

But some economy watchers are suddenly concerned that this latest flurry of job cuts -- a byproduct of various trends such as outsourcing, mergers, automation, changing technology and consumer demands -- may foreshadow some trouble ahead.

"We won't know till afterwards, but I do think we may be seeing a tipping point in the economic cycle that these big layoffs are flagging," said John Challenger, chief executive of Challenger, Gray & Christmas, a Chicago-based employment research firm.

"I think it's a sign that leaks are breaking out," he said.

US corporations announced plans in June to cut 110,996 jobs -- the highest monthly total in 17 months -- and July's toll could turn out to be steeper. Overall job cuts are on the rise this year, reaching 538,274 through June, according to Challenger's monthly job-cut analysis.

Suffering its third straight quarterly loss, Kodak upped its job-slashing target to 22,000 to 25,000 on Wednesday from an earlier range of 12,000 to 15,000. By mid-2007, its worldwide payroll should level out below 50,000, one-third what it was in 1988.

Even as the picture-taking pioneer enjoys rapid gains in digital photography, it is struggling to cope with plummeting demand for conventional silver-halide film, its cash cow for the last century.

"We cannot keep bleeding year after year. We need to establish an end point to this transformation, and we need to get there soon," Kodak's new chief executive, Antonio Perez, told analysts.

The same applies at Hewlett-Packard. The computer and printer maker moved Tuesday to modify its pension benefits and eliminate 14,500 jobs, or nearly 10 percent of its work force, in a scramble to rein in bloated costs and combat efficient rivals.

Kimberly-Clark joined the job terminators on Friday: The maker of Kleenex tissues and Huggies diapers plans to let 6,000 people go and sell or close as many as 20 plants.

And Ford Motor Corp, which is already cutting 2,700 salaried workers this year, is mulling more aggressive measures.

In contrast, International Business Machines Corp's second-quarter earnings beat Wall Street's expectations, suggesting a rebound from its difficulties this spring when it targeted 14,500 job cuts, primarily in Europe.

Indeed, the economic picture displayed plenty of positives this past week.

The Labor Department said the number of Americans filing new claims for unemployment benefits plunged 34,000 to 303,000 -- the largest one-week improvement since December 2002.

And while Greenspan cautioned that a big run-up in already high energy prices could throw a wrench into his forecast, the Federal Reserve Board chairman reiterated his bullish economic outlook.

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