From the December 22, 2000 print edition

2001: Year of the local layoff? Geert De Lombaerde Courier Staff Reporter Local workers are enjoying the best labor market in memory, but their party might be coming to an end.

Sharp reminders of the pain of the ax came Dec. 18, when both Aetna Inc. and Gillette Co. announced large job cuts nationally. Observers say more may be on the way heading into the new year -- both in Greater Cincinnati and nationally.

"I think 2001 will be the year of the layoff," said Peter Kubasek, managing director at The Malibu Group, a Cincinnati firm that advises businesses on merger, acquisition and financing strategies. "Seventy-five to 80 percent of our clients are asking us to consider the microeconomic and macroeconomic effects of a downturn. They understand that they have to be prepared."

And, more often than not, that means being able to cut payroll, something many firms did in the past decade thanks to their investments in technology. But those investments were made during boom times. In the coming year, companies will look twice at making further equipment investments and turn their eye to their staff, if the economy continues to cool. And a chill is definitely in the air.

"It appears that cycle has run its course," said Richard Stevie, general manager of market analysis at Cinergy Corp. and chairman of the Greater Cincinnati Chamber of Commerce's Economic Advisory Committee.

Stevie said he expects layoffs in selective industries, like manufacturing and retail, the latter as a result of the drop-off in consumer spending. But job cuts will not be widespread in other sectors, he added.

They will likely come in sectors where business is softening or where consumers might hesitate to spend their cash. Many of the largest computer makers have issued profit warnings, a sign that businesses are indeed cutting back on investments. And giants like General Motors Corp., Motorola Inc. and Whirlpool already have announced cuts, citing a harsher economic environment.

Inevitably, their moves will filter down to mid-sized and smaller companies, who may then be forced into similar actions. Tri-State manufacturers have already begun trimming staffs. Some 1,300 production jobs have been eliminated since July, according to the Ohio Department of Job and Family Services.

Still, area purchasing managers are optimistic about 2001. In a recent survey, almost two-thirds said they expect their new orders to rise in the first half of the year. Four out of five plan to spend more on purchasing during that time, and 27 percent will increase employment. By contrast, only 18 percent will cut jobs, they said.

Not everyone agrees that the labor markets will loosen up and provide businesses a lot of relief from the agony of super-low unemployment. Stevie said he does not expect overall employment to decline, and Bank One Corp. Chief Economist Diane Swonk foresees the labor shortage intensifying further, particularly at entry-level positions.

Contrasting that view is Stephen Roach, an analyst at Morgan Stanley Dean Witter in New York. In a recent report, Roach -- who expects GDP growth of just 2.5 percent in 2001 -- told clients that the economy's slowing growth rate is vulnerable to an outside shock that could make matters much worse. Such a shock could involve energy prices, the stock market or the strength of the dollar.

"Should any of those come to pass, I am convinced that America's landing will turn from soft to hard in a flash," Roach wrote.

http://www.bizjournals.com/cincinnati/stories/2000/12/25/story1.html?t=printable

-- Martin Thompson (mthom1927@aol.com), December 25, 2000