Even if business rebounds, layoffs may continue

The Chemical workforce in the U.S. shrank by 11,300 in the first quarter as job losses in the industry paralleled those in the broader economy, according to the Bureau of Labor Statistics.

Approximately 3,900 of the chemical jobs were lost in March. The overall U.S. economy lost 663,000 jobs that month, raising the country’s unemployment rate to 8.5% from 8.1% in February.

The new numbers show that the chemical industry's rate of job loss has accelerated compared to 2008. The March employment figure is down 3.3% versus a year ago, whereas full-year 2008 employment was down only 2.5% compared to 2007. The recession has also had an effect on the chemical industry’s average weekly hours of work, which declined 1 hour to 40.9 hours from March 2008.

According to T. Kevin Swift, chief economist for the American Chemistry Council, an industry trade group, the March employment numbers reflect a pace that will likely continue through the rest of the year. Swift says the losses are due both to "ongoing productivity gains and the cyclical component" of low chemical demand due to the recession and credit crunch.

Yet industry watchers see glimmers of a rebound in demand for chemicals in the second quarter. A forecast by chemical consultancy Probe Economics projects that after unprecedented inventory destocking at the end of 2008 and a bottoming out in the first quarter, sales volumes will rise smartly in the second quarter. Currently, customer inventories are too low to keep up with demand for final products, the firm says.

Nobody expects good news when chemical companies post first-quarter earnings later this month. In a report to clients, Jeffries & Co. stock analyst Laurence Alexander writes that specialty chemical firms are likely to lower earnings expectations for the second quarter as well, but that “this earnings season could mark the trough” in earnings for the business cycle.

Economists warn that layoffs may continue even as demand increases at the end of the recession. ACC’s Swift points out that employers tend to wait until earnings have improved before making plans to rehire workers.

Source: Chemical & Engineering News