Production cutbacks are to blame for loss of 41,300 jobs

June employment data from the Department of Labor show that job losses in the chemical sector have accelerated during 2009. Preliminary numbers indicate that the industry employs 41,300 fewer workers than at the same time a year earlier, a decrease of 4.8%.

The shrinking chemical workforce is part of a broader contraction in U.S. employment. Total nonfarm jobs slipped by 4.2% for the 12-month period. In June alone, an estimated 467,000 nonfarm workers lost their jobs, and unemployment has stayed at 9.5%. The government figures show that the manufacturing sector—which includes the chemical industry—was hit hardest, with a 12.3% decline in jobs since June 2008.

Employment in the chemical industry has been slipping for years because of a long-running increase in productivity. More recently, production cutbacks that were instituted in response to the recession are the bigger culprit, according to T. Kevin Swift, chief economist at the American Chemistry Council, the U.S. chemical industry's main trade organization.

"The number of production workers and how many hours they work during the week are a good proxy for production," Swift says. According to the government data, all but 800 of the chemical jobs lost were production jobs, although weekly hours worked have been stable.

Production-related job losses should start to slow now that chemical executives are more comfortable with inventory levels after months of destocking, says Tom Morrison, human capital principal at Deloitte Consulting. Skilled production workers and R&D staff will be prized by companies that are hoping to receive government stimulus funds, he says.

To stay competitive, firms are trying to avoid layoffs while controlling labor costs. "Furloughs, flexible workforce arrangements, workhour cutbacks, shift reconfigurations—we've seen every possible iteration of that coming out of the chemical industry," Morrison observes.

In fact, Wacker Chemie recently announced that it will eliminate 800 positions as part of a restructuring but says it hopes to avoid layoffs by moving many employees to its growing polysilicon business.

Still, Morrison anticipates that as the downturn continues there will be more large acquisitions, which usually lead to layoffs at the combined companies. Dow's acquisition of Rohm and Haas, for example, will mean 3,500 job cuts at the combined firm.

Source: Chemical & Engineering News