Planned job cuts in February fell to their lowest level in five months, but companies are still in a strong downsizing mode that is not likely to end any time soon, according to a report Tuesday.
The outplacement firm Challenger, Gray & Christmas Inc., said planned workforce reductions fell to 77,250 in February, 34 percent lower than in January and 44 percent lower than they were in February 2003.
However, the firm said consumer product companies and industrial goods manufacturers will continue to cut jobs, indicating that employers are not yet confident about future business conditions.
"The monthly average over the last six months still remains above 100,000, which indicates that companies are still in a heavy downsizing mode that is not likely to let up soon," John Challenger, the head of the outplacement firm, said in a statement.
The Challenger data comes at a time when financial markets are jittery as they await the U.S. government's February's payrolls report, due out on Friday.
Last month, the U.S. Labor Department's January report came in below expectations at 112,000 new jobs. The January data also included a slight upward revision to December's shockingly small original number, doing little to alleviate concerns surrounding the so-called U.S. jobless recovery.
To the extent anyone mustered optimism about a turnaround in the sluggish U.S. jobs outlook, analysts pointed to the rise of the employment index in Monday's data on the U.S. manufacturing sector from the Institute for Supply Management.
With anecdotal evidence of job creation at hard-hit U.S. factories growing stronger, many are hoping the U.S. Labor Department's jobs report will start telling the same tale.
But the correlation between ISM's employment index and the U.S. payrolls data has been weak recently and, what is more, the ISM executive in charge of the group's monthly factory survey suggested as much during a conference call with reporters on Monday.
Traders and economists see strong job creation as one of the key factors that will push the Federal Reserve to start raising its official federal funds interest rate, now at 1.00 percent -- its lowest since 1958.
According to Challenger, employers announced 194,806 job cuts in the first two months of the year, 28 percent lower than the same year-to-date period in 2003.
However, consumer product companies and industrial goods manufacturers are planning to cut 51,606 jobs this year, that is 156 percent more than the combined total same period a year ago.
"The increase in planned job cuts could indicate that firms in the two sectors are not very confident about future business conditions, a feeling that may have been buoyed by unexpected declines in consumer confidence and durable goods orders," Challenger said.
