Ed Garsten: December a rough month for retail, automotive industries

Ed Garsten

CNN Detroit Bureau Chief Ed Garsten reports on a study by an international outplacement firm detailing job cuts in December and the year 2000.

Q: What sectors were hardest hit by job cuts?

GARSTEN: The hardest hit were the retail and automotive sectors. In December, a total of 133,713 jobs were cut in the United States. The retail industry lost 39,731 jobs, while automotive lost 25,610 jobs. They were distantly followed by consumer products, telecommunications, e-commerce/Internet and the financial industries.

But December's job cuts were the highest in the seven years that this company -- Challenger, Gray and Christmas -- has conducted such studies.

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For the year 2000, 613,960 jobs cuts were recorded in the United States, a figure that is still 9 percent less than in 1999. The total for retail cuts in 2000 was 94,354, a figure that is 40 percent higher than retail cuts in 1999. The automotive industry lost 85,231 jobs, compared to 27,779 in 1999.

Q: Did the loss of jobs differ from expectations?

GARSTEN: There really is no correlation that the firm made. But they found that the rate of job cuts began to accelerate in the last six months of 2000. The rate per month beginning in July was 75 percent higher than in the first six months. Their analysis is that the U.S. economy is beginning to slow down.

Q: What caused the job cuts?

GARSTEN: A combination of several things. First, high interest rates, which especially hurt the retail and automotive industries. Second, the falling of the stock market. Third, increased fuel prices. Finally, Challenger Gray point out that consumer confidence for the year fell to a two-year low.

Q: Do the job losses in the retail sector during the busy holiday season suggest a change taking place in the U.S. economy?

GARSTEN: It's hard to say. December would have been an average month in the retail industry, perhaps even a little sluggish. But then Montgomery Ward & Co. announced its closure (last week, the Chicago-based chain said it would liquidate its 250-store chain, laying off 28,000 workers). That's what put it over the top.

Q: Are we heading into a recession?

GARSTEN: I talked to a number of analysts and nobody said we are heading into a recession. With the move earlier this week to lower the interest rate, things might start to stabilize.

Q: Where will job cuts take place in 2001, and will the number of jobs cut continue to grow?

GARSTEN: The idea I got from talking to people today is that this trend may continue for a little while longer. Office Depot and Sears, for example, announced store closings, and the auto industry will have temporary plant closures. It appears that the economy needs to reach a low first before things can turn around.

Q: What will be the response by the incoming Bush administration?

GARSTEN: We can expect them to have a greater impetus to get their tax cut plan approved. And with such negative economic new, Congress may feel the need to put more money in people's pockets.

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