Firms trim more jobs in Europe; recession fears rise
Updated: 2012-02-14 07:54
DALLAS, Texas - Global companies from NEC Corp to PepsiCo Inc and AstraZeneca PLC are chopping jobs more than three times faster than in 2011 as they brace for recession in Europe.
Announced workforce reductions surged to 94,369 through Friday from 26,561 a year earlier, according to data compiled by Bloomberg. Employers based in Western Europe accounted for the biggest group of job-cut disclosures, threatening to add to unemployment in the eurozone already running at a 13-year high.
Such firings are now running at the quickest pace to start a year since a 2009 peak, when the European and US economies shrank amid the deepest slump since World War II.
"The problems that the European Union has to deal with suggest that any recovery will be slow in coming and weak," said Allen Sinai, chief global economist at Decision Economics Inc. "Businesses have started to change their commitments in terms of their workforce in light of all the uncertainty."
Slowing economies in Europe and some developing markets were cited by NEC President Nobuhiro Endo on Jan 26 when the Tokyo-based maker of mobile phones and computers lopped 10,000 jobs. The London-based drugmaker AstraZeneca's Feb 2 plan for 7,300 firings follows the elimination of 21,600 positions since 2007.
Europe's weakness contrasts with a US labor market in which economists project more job creation this year than at any time since 2006. Even with PepsiCo joining 26 other companies in North America in disclosing cuts in 2012, fewer than 25 percent of the 8,700 jobs being trimmed at the company will be in the United States.
Joblessness in the US slid to 8.3 percent in January amid the fastest growth in nonfarm payrolls in nine months. December's unemployment rate in the eurozone reached 10.4 percent, the highest since June 1998.
"We look at the same data as everybody else," said Michael Lamach, chief executive officer of the Ireland-based Ingersoll Rand PLC. "But the part that we probably interpret less positively is Europe."
Europe revenue may fall as much as 12 percent in 2012 at the maker of Trane air conditioners as business dwindles and the euro weakens, Lamach said. Ingersoll Rand expects $50 million in unspecified European restructuring costs, possibly including job cuts.
"There's a recession in Europe right now," said Jay Bryson, senior global economist with Wells Fargo Securities LLC.
"The confidence shock on financial markets in the second half of last year has translated in a drop in orders and activity," Clemente De Lucia, a BNP Paribas economist, said in an interview from Paris. "The employment situation remains tough as business sentiment on activity hasn't recovered."
While an EU recession will last only a couple of quarters before growth resumes in the second half of 2012, the pullback in public-sector spending may mean slower European expansion persists for years, said Gerd Hassel, an economist at BHF Bank AG in Frankfurt.
"It's simply the austerity measures that dampen consumer expectations," Hassel said in an interview. That backdrop means CEOs "are very reluctant to increase their production".