Job Cuts vs. the “War for Talent”

It’s hard to get shocked anymore by businesses cutting jobs. In some sectors—like newspapers, where The Tampa Tribune this week announced a cut of 70 staff positions—layoffs and cutbacks have become so common that they have ceased to be newsworthy since they seem to happen every day. And that is exactly why yesterday’s big layoff announcement from banking giant Citigroup was so surprising.

Part of it is the sheer size of the Citigroup cuts (17,000 jobs, some 5 percent of the company’s 327,000-person workforce), but another part is the amount the company will save as a result—$2.6 billion in 2008 from these cuts alone. When you add in savings from some previously announced restructuring, Citigroup’s overall savings will total more than $2 billion this year, nearly $3.7 billion next year and close to $4.6 billion in 2009. Those are mind-boggling numbers.

Citigroup’s action is also surprising because the 17,000 job cuts represent the “largest single job-cut announcement outside the automotive industry since 2005,” according to global outplacement consultancy Challenger, Gray & Christmas. “Unlike many of the financial job cuts that have occurred this year, [the] Citigroup cuts are not directly related to the housing slowdown and decline in mortgage lending,” John Challenger says. “Rather, it was the pressure to reduce costs, which were significantly outpacing profits for the nation’s largest financial institution.”

What is also troubling is that unemployment rates in major markets are on the rise. As reported in the Data Bank column in the April 9 issue of Workforce Management magazine, unemployment in major cities (measured from January 2006 to January 2007) is up across the board. Some examples:

• Boston —5.2 percent, up from 4.4 percent
• Chicago —5.1 percent, up from 3.9 percent
• Los Angeles —4.6 percent, up from 3.9 percent
• Minneapolis/St. Paul—4.7 percent, up from 3.8 percent
• New York —5.6 percent, up from 4 percent
• Phoenix —3.9 percent, up from 3.3 percent

“We are starting to see non-automotive and non-housing job cuts grow in size,” Challenger says. “If consumer and business spending cools this summer, the economy could weaken further and large job cuts may become a more common occurrence.”

So, just what is happening here? Do we have a “war for talent,” as we keep hearing about, or is unemployment rising as companies cut back? According to BusinessWeek, it’s a bit of both. While workers with skills in short supply are in high demand, BusinessWeek says that “the strongest evidence that there is no general shortage [of workers] today is that overall worker pay has barely outpaced inflation. In the U.S., the share of national income going to corporate profit, rather than, say, labor, is hovering around a 50-year high.”

In other words, if you are a teacher, salesperson, or petroleum engineer, employers are beating down your door. However, if you are an auto worker, journalist or middle manager, well, good luck.