-But Usual Year-End Volatility Makes it Hard to Quantify Fiscal Cliff Impact

By Josh Newell

WASHINGTON (MNI) – Worries over the fiscal cliff are slowing job creation,
though its unclear if the issue is causing actual job cuts in the last two
months of the year, John Challenger, the CEO of a major outplacement firm, told
MNI in an interview.

The head of Challenger, Gray & Christmas said he expects job cuts to
accelerate into the end of the year, but because of seasonal volatility it is
tough to determine how much of this can be attributed to uncertainty due to the
fiscal cliff.

“It’s not just job losses, which I don’t think really you can say a company
cut because of the fiscal cliff, but its certainly causing them to increase the
odds that we do go into recession in 2013 and 2014 and certainly will reduce
their risk-taking in terms of opening up new plants and product lines and adding
people,” he said in an interview Monday. “So the growth-oriented risk taking
that leads to job creation, that’s going to be curtailed.”

But Challenger said usual end-of-year volatility confuses the precise cause
of the rising job cuts, which jumped 41% in October, according to a monthly
report from the firm.

“We always see job cuts go up in the fourth quarter as we get to year-end,
as some companies have not met their objectives and start to cut jobs,” he said,
noting this trend makes it hard to tell how much the fiscal cliff is impacting
layoff plans.

“I do think we will continue to see cuts accelerate into the end of this
year, but if the fiscal cliff is not resolved this could continue well into the
first and second quarter of next year.”

Challenger cautioned, “There’s no question that the economy is vulnerable
to that recession. If we do go off the fiscal cliff, if they fall back into
their two opposing camps and can’t come to an agreement, then downsizing will
take a big jump, unemployment will go up, and the labor market will suffer in
2013.”

He pointed to the defense industry as a sector that is experiencing
downsizing, saying there is “no question the defense sector has been cutting
back; the government is cutting back and then defense companies are cutting back
as well.”

Asked about the the impact of the eurozone crisis on the U.S. employment
picture, Challenger said, “When business in a U.S. company declines in a major
market such as Europe, it means they have to cut jobs here too, and this is
already happening.”

He cited Ford which recently closed a plant in Belgium and said there is
little doubt this global economic weakness will continue “for some time.”

** MNI Washington Bureau: 202-371-2121 **

–email: dcoffice@mni-news.com

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