Mortgage Industry Woes Boost August Layoffs

Chicago, IL, September 5, 2007—Job cuts announced in August were up 22% from a year earlier, according to a report from Challenger, Gray & Christmas. The report said that layoff announcements rose to 79,459 last month from 65,278 in August 2006,

The figures were not adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of monthly figures.

“The story in August revolves around the dramatic collapse of the mortgage and subprime lending markets,” John A. Challenger, chief executive officer of the placement company, said in a statement. “We have not seen such a rapid descent since the airlines shed thousands of workers in the wake of September 11. These cuts are likely to be just the beginning.”

Firings may accelerate as lenders, builders and home-improvement companies feel the bite of the worst housing recession in 16 years, the report said. While unemployment in August is forecast to be unchanged from the previous month, according to a Bloomberg survey, the pace of hiring in the world’s biggest economy has been slowing.

The number of planned job cuts rose 85 percent last month from 42,897 in July, when it fell to a 12-month low, the report said. Job cuts in the financial industry last month totaled 35,752, more than double the announced reductions in May, June and July combined. They compared with 1,666 in August 2006.

Overall, financial institutions have announced 102,758 job cuts so far this year, compared with 33,346 in the same period last year. At the current pace, job cuts in the financial industry are likely to pass the previous record high of 116,515 set in the recession year of 2001, Challenger said.

Housing-related layoffs, including construction, real estate and financial, were 31,746 in August, up from 817 a year ago. Those firings have totaled 71,044 year-to-date, compared with 22,814 in all of 2006.

After the financial industry, consumer-products companies announced the second-greatest number of sackings in August, at 8,703, followed by 4,976 in the automotive industry, the report said.