Factory Job Losses Show Companies Still Worried About Costs

(Bloomberg) -- Manufacturers across Asia and Europe are cutting jobs as continued weak demand forces them to take aggressive action on costs.

Surveys of companies show factory employment declined in countries including South Korea, Japan, China, Taiwan, Germany and France last month, even as measures of activity picked up. The fall in Germany was particularly pronounced, close to the fastest since the depths of the 2009 recession.

The figures show that businesses around the world are still trying to find ways to deal with the fallout from the pandemic, with cost-cutting a key focus for many. While activity and sentiment measures have improved since the trough in April and May, it’s far from a full recovery. The threat of fresh outbreaks of the coronavirus, renewed lockdowns, as well as ongoing consumer caution means any rebound could prove to be a stop-start affair.

In the euro area, IHS Markit’s monthly Purchasing Managers’ Index jumped more than forecast in July, signaling the strongest growth since late 2018. But backlogs of work declined further and companies cut workforce numbers for a 15th straight month.

“The job numbers remain a major concern,” said Chris Williamson, chief business economist at IHS Markit, “especially as the labor market is likely to be key to determining the economy’s recovery path.” He added that while the rate of job cuts has eased since the height of the crisis, it was still greater than at any time since 2009.

Heineken Chief Executive Dolf Van Den Brink said Monday that its markets remain very volatile and the company will continue to monitor costs.

“We want to err on the side of caution,” Van Den Brink said on Bloomberg Television.

In Asia, PMIs for Japan, South Korea, and Taiwan -- among the region’s manufacturing powerhouses -- advanced last month alongside most others in the region.

But the jobs picture was less rosy there too. South Korean manufacturers are being squeezed by a damaging mix of higher average costs and price discounting in the face of weaker demand, and cut jobs in July. Margin pressure was also an issue in Indonesia, where factory employment was “reduced sharply,” according to the release.

In Taiwan, where employment declined modestly, some firms cited “relatively subdued sales and efforts to raise efficiency,” IHS Markit said.

“The outlook remains challenging, as economies around the globe continue to grapple with getting the virus under control, which could weigh on demand going forward,” said Annabel Fiddes, a economist at Markit.

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