If We Are In An Economic Recovery, Why Are Major Corporations Firing Thousands?

Planned job cuts in the third quarter rose 25% from a year ago. With September jobs cuts up 19% from last year, it represented the fourth month in a row in which job cuts were higher than the same month last year. Despite the current trend, employers are on pace to cut roughly the same number of jobs that were cut last year.

According to data compiled by Challenger, Gray & Christmas [17], 10 companies alone have announced close to 75,000 job cuts this year, combined. This represents nearly 20% of all the announced cuts in 2013.

In an interview with 24/7 Wall St., Challenger, Gray, & Christmas CEO John Challenger explained, “For every situation, there’s a different reason for a company to cut jobs.” In some cases, it is a matter of simple corporate restructuring. In other cases, companies facing difficult headwinds are forced to shed jobs. Based on data from Challenger, Gray & Christmas, 24/7 Wall St. reviewed the companies cutting the most jobs.

The companies that are cutting the most jobs this year are, not surprisingly, in industries that are eliminating the most positions overall. The financial services sector is leading the way with 48,874 planned layoffs year to date. American Express, J.P. Morgan and Wells Fargo are all among the top 10 for announced job cuts.

Retail was also in the top five industries, with J.C. Penney and Dish Network’s Blockbuster in the top 10. Aerospace and defense was also among the industries with the most planned layoffs. United Technologies and Boeing were among the companies eliminating the most jobs.

Not all businesses have cut jobs due to poor demand for their products. Challenger also noted that companies announce job cuts when jobs are relocated to another part of the country, or even the world. Metlife moved a large number of jobs from the Northeast to a new base in North Carolina. Additionally, the company also scaled back its variable annuities business, while expanding its presence in emerging markets.

Similarly, United Technologies has been restructuring its operations, both this year and last, in order to cut costs and integrate acquisitions, notably the $16 billion purchase of aircraft component maker Goodrich.

Sometimes, technological change drives job cuts. “In these cases, the business model changes in response to new technology that affects the company or the industry, and a particular company adjusts,” Challenger explained. Cisco has had to contend with the emergence of cloud computing, as cheaper services have undercut the company’s traditionally profitable businesses. Similarly, the travel business of American Express has been impacted by the growth in travel websites.

Some businesses have had to cut jobs as part of their efforts to stay afloat. ”A company just isn’t performing well via its competition, or maybe just revenue is down, and they’re just cutting back,” Challenger explained. J.C. Penney’s sales have declined precipitously in recent years, and it has struggled to keep enough cash on hand to run its business. As a result, the company has had to cut more than 15,000 jobs in 2013. Dish has had to slash jobs at Blockbuster as it continues to close unprofitable stores.

Many of the companies announcing the most job cuts are also among the country’s largest employers. This means, in many cases, the layoffs represent only a small proportion of companies’ total workforces. IBM’s 9,4000 job cuts accounted for just over 2% of the company’s total headcount as of this year.

Only a few of the companies cutting the most jobs have lost money. Only one of these companies, J.C. Penney, posted a net loss, while half increased their net income during their past full fiscal year. Also, shareholders in all but two of the 10 companies, J.C. Penney and IBM, have seen the value of their holdings rise so far in 2013.

Challenger Gray & Christmas [18] provided 24/7 Wall St. with all job cut announcements affecting at least 500 positions this year. 24/7 Wall St. combined all planned cuts by company to identify the companies that are cutting the most jobs this year. We only considered publicly traded, American companies, or divisions of publicly traded companies. Job cuts did not need to be entirely within the United States, however. Some cuts announced in 2013 may not be completed this year. Full-time employee totals were from Yahoo! Finance.

These are the 10 companies cutting the most jobs.

1. JPMorgan Chase & Co. > Job cuts: 19,000 > Number of employees: 254,063 > YTD share price change: +15.7%

JPMorgan Chase is one of the nation’s largest banks. More than half of U.S. households are customers of the bank, according to the company. However, as customers increasingly use self-service technologies, the firm announced plans to trim back its consumer banking staff by 4,000. The company also announced its intentions to lay off 15,000 mortgage workers, many of whom were brought in to process defaulted mortgages during the housing crisis. JPMorgan continues to be one of the most profitable companies in the U.S.

2. J.C. Penney Company, Inc. > Job cuts: 15,020 > Number of employees: 116,000 > YTD share price change: -60.6%

J.C. Penney had been coy about the total number of layoffs at the company, which began under former CEO Ron Johnson. The onetime leader admitted in March the company had trimmed as many as 19,000 jobs since his arrival, the majority of which in early 2013 according to Challenger Gray. Barely a few days later, the company confirmed it was eliminating an additional 2,200 jobs. JC Penney has since fired Johnson, and his largest supporter, hedge fund manager Bill Ackman, has quit the company’s board. In recent years, the retailer has been struggling as sales and earnings have declined, and it has continued burning through cash. Recently, Penney had to issue new shares to raise cash, hurting the value of stock owned by existing shareholders.

3. International Business Machines Corp. > Job cuts: 9,400 > Number of employees: 434,246 > YTD share price change: -6.7%

In the first quarter of the year IBM reported a drop in its sales, which was followed by an announcement the company would cut between 6,000 to 8,000 workers worldwide. Yet while cuts took place largely outside the U.S., many American IBM workers were still targets for layoffs. As of August, the company had trimmed more than 3,300 jobs in the U.S. and Canada and furloughed much of its hardware staff. Prior to its recent struggles, the company received criticism for outsourcing jobs to India. Recently, the New York Post reported that IBM now employs more workers in India than in the U.S.

4. Boeing Co. > Job cuts: 5,800 > Number of employees: 174,400 > YTD share price change: +53.2%

Boeing announced in March that it would be cutting over 2,300 machinist positions from its workforce. It followed up that announcement in May, noting it would gradually reduce its Washington-based IT workforce by about 1,500 over three years. These cuts were not all in the form of firings. Some jobs are expected to be lost to attrition and others simply transferred to other states. The company has had many problems in recent years with the development of its newest major commercial plane, the 787 Dreamliner, most notably a faulty battery system. Recently, the company has eliminated another roughly 3,000 jobs related to the production of its C-17 transportation jet, following the cuts to the U.S. military’s budget.

5. American Express Company > Job cuts: 5,400 > Number of employees: 63,500 > YTD share price change: +25.6%

American Express announced at the start of the year that it would cut its workforce by 5,400 employees. Many of these cuts took place in the company’s travel division. Among the major factors driving the company’s restructuring has been the increased reliance of travelers on online travel booking. The company also recently has arranged to sell its publishing division, which includes both general and cardholder-exclusive magazines, to Time Inc.

6. Wells Fargo & Co. > Job cuts: 5,236 > Number of employees: 274,300 > YTD share price change: +17.7%

Wells Fargo announced in August it was laying off 2,300 employees from its mortgage production unit. The major reason for the cuts was the lower demand for mortgage refinancing. This was popular with homebuyers when interest rates were lower, but became far less common once rates began rising. Wells Fargo continued to cut jobs at the end of the summer as mortgage refinancing remained slow. Last year, Wells Fargo processed nearly 400,000 mortgage applications, more than four times the amount of any other U.S. bank.

7. Cisco Systems, Inc. > Job cuts: 4,500 > Number of employees: 75,049 > YTD share price change: +15.2%

Cisco laid off 500 workers in March as part of a minor restructuring in its data center businesses. However, the company did not stop there. And after reporting a disappointing quarter, Cisco cut 4,000 jobs, bringing the company’s total layoffs to 12,300 jobs in the past two years. The company has been aggressively cutting costs in recent years as its networking products have become increasingly commoditized, according to Bloomberg. Additionally, the markets for Cisco’s core networking offerings — modems, switches, WiFi routers, etc. — may have plateaued, while new advancements in cloud computing have undercut the company’s profitability.

8. MetLife Inc. > Job cuts: 3,150 > Number of employees: 64,000 > YTD share price change: +41.0%

MetLife announced in March that it would cut 650 jobs from its Bloomfield, Connecticut, offices. The cuts are part of its plans to consolidate its operations and open new offices in North Carolina, where it will shift 2,600 jobs. The company additionally cut a third of its advisers, or 2,500 jobs, at the end of May. In regards to these firings, CEO Eric Steigerwalt noted in a presentation to investors that “we’re not financing advisers who frankly were never going to make it in this business.” This was part of the company’s plans to improve its results by cutting off financing to unsuccessful advisers while capping its sales for variable annuities.

9. Blockbuster (Dish Network Corp.) > Job cuts: 3,000 > Number of employees: 35,000 > YTD share price change: +30.1%

In 2010, Blockbuster, then the largest movie-rental company in the world, filed for bankruptcy. At the time it planned to restructure its business to better compete with faster-growing rivals. Dish bought Blockbuster’s assets in 2011 and has been closing failing stores since. At the beginning of this year, the company announced it would be closing 300 U.S. stores, which resulted in 3,000 lost jobs. According to news reports, Dish still sees value in the Blockbuster brand and will continue its attempt to make it profitable.

10. United Technologies, Inc. > Job cuts: 3,000 > Number of employees: 218,000 > YTD share price change: +25.3%

Last year, United Technologies purchased aircraft component maker Goodrich for $16.4 billion and sold several smaller units. The company also took a major restructuring charge that hurt earnings. In its annual report the company disclosed it would cut an additionally 3,000 jobs in 2013. This was on top of the 4,000 cut the year before as part of its restructuring program. Matters could have been worse for many employees, since the company, a major government contractor, had plans to furlough up to 4,000 jobs during the government shutdown. However, employees were able to continue working after the Pentagon removed its own furlough on civilian employees.