6 Employers at Risk of Future Layoffs
Industry consolidation and technological changes put these employers at risk.
Sept. 23, 2011 — -- intro:
After the Federal Reserve's gloomy economic outlook that sent stocks into a tailspin this week, employers already operating with minimal staffing may feel further pressure to downsize.
"The labor market has been frozen for the last year and is not yet showing signs of thawing out," Stephen Bronars, chief economist with Welch Consulting, said.
Bronars said industries relying on European exports face challenges in the months ahead as the euro zone economy may suffer a double dip recession. These industries include aircraft and parts, pharmaceuticals and medical equipment.
Reseach company IBISWorld said the trends driving future reductions are cuts at state and local governments, technological advancements and consolidation. Overall the healthcare sector has seen growth, but some jobs, such as in the hospital sector have disappeared. That's expected to turn the corner in 2012 fortunately for hospital workers.
IBISWorld forecasts the unemployment rate, currently 9.1 percent, to stay above 8 percent through 2012 mainly due to few new jobs created rather than the mass layoffs of 2008 and 2009. However, some industries are expected to have significant job losses in 2011 and potentially more on the way in 2012. Here are some industries that could be at risk for future layoffs.
quicklist: 1title: Verizonmedia: 14586218text:
The two-week strike of 45,000 Verizon employees may have come to an end, but some of their jobs may be at risk, at least in wired services. That's because wired telecommunications carriers are facing considerable pricing pressure on landline voice communications. This is forcing large carriers such as Verizon Communications Inc. to shift their investment into alternative mobile areas, said IBISWorld research analyst Areeb Pirani.
A spokesman for Verizon said the company had no comment.
Pirani said the planned merger of AT&T and T-Mobile, which is the Justice Department is trying to block, is further evidence of wired company shifts and expansion into the wireless realm.
He said shifting demand has created a "shrinking need for employment in the technologies that are being replaced."
quicklist: 2title: Redboxmedia: 14586404text:
DVD, game and video rentals companies will face challenges as consumers turn to more convenient streaming and downloading media in the next five years, according to Kaczanowska.
Coinstar Inc. operates convenient Redbox DVD distribution machines in frequently-visited locations such as grocery stores. Customers can rent DVDs, Blu-ray and even video games for as little as $1 a night. The company may have benefitted in the short term from Blockbuster store closures, but Kaczanowska said it will shed jobs as demand dwindles and the company looks to cut costs.
Kate Brennan, Redbox spokeswoman, said in a company statement that consumers continue to turn to physical media to watch movies at home. She added consumer demand for physical media is higlighted in data from research company NPD group that showed consumers spent $1.85 billion on video game content in the first quarter of 2011, including game rentals.
"As such, Redbox installs new kiosks everyday to meet consumer demand for hot new-release movies via more than 33,000 kiosks at more than 27,800 locations nationwide," the company said in its statement.
Redbox has rented more than 1.5 billion discs as of June 2011, including more than 4 million video games, according to the company.
quicklist: 3title: Bank of Americamedia: 14357731text:
Bank of America, trying to break free from a portfolio of bad mortgages and a sagging stock price, announced on Sept. 12 plans to lay off 30,000 employees over the next few years.
The Charlotte, N.C.-based bank, the largest in the U.S. by deposits, said it will cut $5 billion in costs.
Bank of America is now the employer with the largest U.S. layoff announcement this year, according to global outplacement firm Challenger Gray & Christmas. Pharmaceutical company Merck formerly held that title after announcing on July 29 plans to layoff 13,000 employees by the end of 2015.
Phil Orlando, chief equity strategist with Federated Investors, said the financial sector may be at risk of further layoffs due to an unintended consequence of the Dodd-Frank bill. He said financial regulation reform is influencing shifts in the banking industry.
"But virtually all companies in America are as lean as they can get right now," Orlando said.
As Wall Street banks have suffered from investor uncertainty and a weak economy, even venerated Goldman Sachs could be in danger of reporting its first quarterly loss since the financial crisis, according to the Wall Street Journal on Friday. On Thursday, Barclays capital analyst Roger Freeman forecasted Goldman Sachs will lose 35 cents a share for the third quarter, its second quarterly loss as a public company, reported the Journal.
quicklist: 4title: National Parks Servicemedia: 14586328text:
Federal and state government cuts may disrupt citizens' enjoyment of the country's natural beauty and put jobs at risk.
As government support of parks shrinks due to cuts and dwindling visitor numbers, many parks are cutting labor costs through a variety of measures. The National Park Service, the federal agency that manages all national parks, has increased its reliance on volunteers, taking advantage of over 6 million volunteer hours last year alone, said IBISWorld industry analyst Agata Kaczanowska.
David Barna, a spokesman for the agency, said the agency is funded through the fiscal year and does "not see any risk."
The agency has 28,000 employees and 2.5 million volunteers that oversee 395 national parks, according to the National Parks Service website which has cumulative data through the end of fiscal year 2008.
quicklist: 5title: Clean Harbors Inc. media: 14586339text:
While the BP oil spill was environmentally disastrous, it boosted the remediation and environmental cleanup industry. Industry players like Clean Harbors Inc. landed contracts to carry out services to help mitigate the effects of the oil spill.
But this trend has led to revenue and employment drops as the work associated with the oil spill slows down, said IbisWorld senior analyst Justin Molavi. That includes the slowdown of vast amounts of private and government funds allocated to help mediate the spill's impact.
Clean Harbor Inc. did not return a request for comment.
quicklist: 6title: Corrections Corporation of Americamedia: 14586371text:
The correctional facilities industry is struggling to retain employees due to the high stress and risk associated with the work. Corrections Corporation of America, the nation's largest private prison company, is adapting to these challenges and cutting escalating wage costs by building increasingly automated security features into its facilities, said Kaczanowska. Technological advances could mean fewer jobs, which is bad news for jailers.
Steven Owen, senior director of public affairs for Corrections Corporation of America, said the company is "very pleased" with its second quarter earnings announced on Aug. 4. Compared to the second quarter of 2010, the company had a 15.8 percent increase in net income to $42.4 million.
"As noted when these figures were released, we have continued to generate growth to the bottom line and are encouraged by the opportunities that are arising as certain states consider efficiency and savings opportunities provided by the partnership corrections industry," Owen said.
On Tuesday, Corrections Corporation of America settled a lawsuit with inmates over allegations of violence at the Idaho Correctional Center south of Boise. The company has denied all allegations as part of the settlement but agreed to increase staffing, investigate all assaults and make other sweeping changes at its facility, as reported by the Associated Press.
quicklist: 7title: Community Health Systems Inc.media: 14586415text:
Despite growth in healthcare jobs in general, reductions in Medicare and Medicaid spending, combined with a high number of uninsured, has put profitability under pressure for hospitals.
President Obama proposed on Monday to cut $248 billion from Medicare and $72 billion from Medicaid funding as part of $2 trillion plan to reduce the nation's debt through tax increases and spending cuts.
IBISWorld healthcare analyst Sophia Snyder said hospital operators are now pursuing various paths to stay afloat. This includes acquisitions, such as in the case of Community Health Systems Inc., a major industry player that has grown to 131 hospitals in 2011 from 57 hospitals at the start of 2002, said Snyder. Community Health Systems was not immediately available for comment.
In particular, she said administrative and operational jobs in hospitals are at risk. She said some centers are teaming up with nearby providers to reduce expenses in areas like data management, medical system upgrades, supply procurement and billing functions.
Rich Umbdenstock, president and CEO of the American Hospital Association, said President Obama's proposal to cut Medicare and Medicaid funding would translate into at least 200,000 job losses to hospitals and related businesses by 2021.
"President Obama's proposal will make it harder for America's seniors to receive the care they need and will result in the loss of jobs in communities across the nation," Umbdenstock said in a statement on Monday.
Umbdenstock said local economies will also suffer from further cuts in hospital care funding.
"Hospitals created 8,000 new jobs last month, at a time when there was zero growth in overall U.S. job creation," he said, adding that the value of each of those jobs triples with hospitals purchases of goods and services.
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