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Layoffs are no longer a last resort for companies

Longtime licensed practical nurse Barbara Martin was mystified when she was laid off this month from HCA's St. Petersburg General Hospital.

After all, the health care industry has been faring better than other parts of the economy. And there are not enough nurses to go around, she said.

It's the type of move that speaks volumes about shifting priorities. In past generations, employers used to ditch jobs as the last recourse in a recession. This is not your father's recession. Many healthy companies fearful of a deepening recession are willing to cut jobs early rather than trying to hold on to them.

Scott Brown, chief economist with Raymond James in St. Petersburg, said he has been startled by how "extraordinarily quick'' companies are to let workers go.

"Normally, there are training and administration costs to worry about. So you don't want to lay someone off unless the economy is really bad,'' Brown said. "This time, firms have been laying people off almost immediately as demand falls.''

One sign of that changing dynamic, Brown said, is that the aggregate number of work-hours is falling faster than output. Or, in non-economistspeak, companies are slashing jobs even though their productivity remains high.

Heidi Shierholz, labor economist with the Economic Policy Institute, said there was a relatively modest contraction of the labor market a year ago when the recession was taking root. "Now the labor market is so bad that we're really seeing that shedding.''

In fact, she said, the acceleration of job cuts has been steeper than any modern recession, based on data going back to 1960. In Florida the pace of mass layoffs is up 69 percent in the first seven weeks of the year compared to a year ago.

And the job purge is showing no sign of leveling off. "We are nowhere near the bottom of this,'' Shierholz said.

A flurry of layoff announcements in the last half of January pushed the job-cut total nationwide to 241,749, the highest monthly total since January 2002, according to national outplacement agency Challenger Gray & Christmas.

"This storm really came ashore in banking ... and home construction. Since the fourth quarter, it's spread into areas like retail and technology and other big sectors of the economy," said agency CEO John A. Challenger. "Even the healthy sectors are stressed now, like health care and education.''

Martin, the nurse, fell into that category, though she still wonders why.

"There's not enough nurses to take care of the patients they have,'' said Martin, 61. "It just doesn't make sense.''

HCA spokeswoman Debra McKell defended the hospital's care. She said she couldn't discuss the scope of limited layoffs at any of the nine bay area hospitals in the HCA chain, saying a decentralized process gives each hospital leeway in cutting costs.

Currently, the U.S. unemployment rate is 7.6 percent and Florida's jobless number is 8.1 percent. Some economists predict Florida's rate will rise into the double digits this year.

Accelerated layoffs make it tougher for the longtime unemployed to get their footing since the job market is continually fueled with the newly laid off. As a result, the number of people receiving extended unemployment benefits has hit record levels.

Under the Worker Adjustment and Retraining Notification Act (or WARN), companies must report when an employment site will be shut down involving 50 or more people or when 500 or more workers are involved. They also must report when at least 33 percent of the work force at a location is cut.

Of the 4,200 WARN announcements in Florida so far in 2009, 705 directly affect employees in the Tampa Bay area. The biggest announced cut in the area to date: the 300 jobs slated for elimination at the Belleview Biltmore Resort & Spa in Belleair.

Last year, of the 2,488 statewide cuts by now, 589 occurred in the Tampa Bay area.

Challenger, of the outplacement agency, said companies are in a difficult position of estimating how many jobs to cut at one time given the uncertain economic outlook this year.

"If you want to get it all done in one fell swoop, you may cut too deeply,'' he said. "But if you don't cut deeply enough and then you do another layoff, you leave people permanently under the gun wondering, 'Who knows when another layoff is going to occur?' '

Times staff writer Robert Trigaux contributed to this report. Jeff Harrington can be reached at jharrington@sptimes.com.

Unpaid days off vs. job cuts

Though layoffs are rising, they're only part of the grab bag that employers are using to cut the cost of their work force.

Wage freezes. Pay cuts. Health care and retirement benefit reductions. And, increasingly, companies are resorting to a wage-cutting option that's best known in government and manufacturing circles: unpaid furloughs.

Furloughs come in different shapes and sizes, though they're tethered to the same basic assumption: by compelling a worker to take unpaid time off of one day a week or several weeks a year, it spares a layoff for now.

Florida Gov. Charlie Crist has said he hopes to avoid major layoffs or furloughs of state employees by using nearly $8 billion in federal stimulus aid over the next 16 months.

But other governors have embraced it, beginning in December with beleaguered California Gov. Arnold Schwarzenegger. Last week, New Jersey Gov. Jon S. Corzine proposed a two-day furlough for state workers and indicated layoffs would follow if unions don't agree to wage freezes.

Corporations from AK Steel, Piper Aircraft and General Electric to media companies like Gannett and Media General, which owns the Tampa Tribune and WFLA-Ch. 8, all have recently imposed furloughs.

The biggest advantage to a furlough is it's a relatively quick way to cut labor costs without the added expenses of severance, training and administrative processing. If a company is trying to survive a temporary slide in revenues, it also spares the costs associated with hiring and training new employees when business rebounds.

Among the disadvantages: If a company's work force is already at maximum output, there could be added overtime costs that would mitigate the cost savings of a furlough. It also could impair the productivity and happiness of employees by fueling financial stress and job disenchantment.

Jeff Harrington, Times Staff Writer

Layoffs are no longer a last resort for companies 02/23/09 [Last modified: Monday, February 23, 2009 11:31pm]

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