Dot-Com Job Losses Spike in May

Underscoring the fragility of the economic recovery in the tech sector, Internet companies slashed 2,078 jobs in May, three times as many as in April, according to a report from outplacement firm Challenger, Gray & Christmas.

The May job cut total was the highest since December 2001, when 2,403 workers lost Web-related jobs.

"We're probably going to continue to see consistent job cutting," CEO John Challenger told the E-Commerce Times. "The assumption that there are no jobs left to eliminate in this sector has been proven wrong month after month."

Terrible Tally

All told, 149,363 Internet job cuts have been tallied by Challenger since December 1999, including 7,000 since the beginning of 2002.

May's total pales in comparison to the same month last year. In May 2001, 13,419 jobs were slashed in the midst of a five-month stretch that represented the peak of dot-com layoffs to date.

"New Internet firms are still being started all the time, so these will be a source for both job creation as well as job loss in the future," Challenger said.

Dot-Com Dependents

While monthly fluctuations in the number of layoffs are no surprise, Challenger, Gray & Christmas said the health of the Web sector is a fairly good indicator of the overall health of the U.S. economy.

"Dot-coms are tied closely to other areas of the economy," Challenger said. "If a retailer is suffering, for example, it will cut its budget for its Internet exposure. With few exceptions, most dot-coms cannot stand on their own -- they are dependent on the sector to which they are most closely related."

Tech firms and those providing Web services saw the heaviest cuts in May, with 1,517 layoffs announced. Technology firms have been leading the layoff parade of late, ranking first in nine of the last 12 months, the firm found.

Consumer services firms, which provide financial and related services, ranked second in May with 390 cuts. Online retail was third with 73 announced layoffs, and media and entertainment rounded out the list with 50 and 48 job cuts, respectively.

More Layoffs Loom

Challenger's report comes as several major tech companies announce or plan layoffs. IBM (NYSE: IBM) cut 2,000 workers from its Global Services division late last month and is in the process of cutting additional jobs. Those losses could total 8,000 by summer's end, according to reports.

As many as 15,000 jobs also are said to be in jeopardy as the newly merged HP-Compaq begins to take shape. About 9,000 employees are currently eligible for programs that encourage them to leave voluntarily.

HP (NYSE: HPQ) CEO Carly Fiorina reportedly insisted that the job cuts will be part of a larger effort to integrate the two companies and boost confidence in HP's future.