Author: Site Staff

In a case presented Monday, December 1, the Supreme Court considered whether employees can pursue discrimination cases in court even if a collective bargaining agreement mandates that they go to arbitration.

The justices weighed the right of individual workers to file age discrimination suits against the certainty a contract provides employers and unions that the cases will be settled in arbitration, which is considered faster and less costly than court proceedings.

The case revolves around workers employed by Temco Services Industries, a contractor that works in buildings owned by the Pennsylvania Building Co. and 14 Penn Plaza LLC. They were covered by the collective bargaining agreement between the Service Employees International Union and the multi-employer association of the New York City real estate industry.

Several of the Temco workers allege their jobs as night watchmen were taken away and they were reassigned to less desirable positions in August 2003 when Temco contracted with Spartan Security. They said that they were the only people on staff over the age of 50 and filed an age discrimination grievance.

But their union did pursue the wrongful transfer or age discrimination complaints in arbitration. Under the collective bargaining pact, arbitration was mandatory for discrimination claims.

In May 2004, the workers filed discrimination charges with the Equal Employment Opportunity Commission, asserting that their rights had been violated under the Age Discrimination in Employment Act.

A district court ruled that despite explicit language in the union contract calling for arbitration, the employees could not be denied a day in court to fight discrimination. The New York-based 2nd Circuit Court of Appeals concurred.

Justice Ruth Bader Ginsburg expressed concern that the individual right to sue for age discrimination was subjugated to the union-employer agreement.

“This is not a bargainable right,” Ginsburg said.

Paul Salvatore, the attorney representing 14 Penn Plaza, responded that the union contract allowed workers to pursue their case—but they had to do it in arbitration rather than a courtroom.

“We’re not talking about substantive rights,” Salvatore said. “We’re talking about procedural rights.”

But David Frederick, the attorney for the workers, argued they could not be restricted to arbitration unless they gave their individual consent.

Justice Stephen Breyer, however, questioned how many different types of cases could fall under a Supreme Court decision upholding the workers’ position. It could range far beyond discrimination and total tens of thousands.

“What’s the principle?” Breyer asked Department of Justice attorney Curtis Gannon, who supported the employees’ position. “What is the line here that we’re drawing with this case?”

Earlier, Frederick said that he didn’t foresee a burgeoning number of suits. “I don’t think ruling in the workers’ favor in this case opens any kind of Pandora’s box at all,” he said.

Chief Justice John Roberts Jr. and Justice Anthony Kennedy both wondered how companies would fare if workers could pursue redress in the court system in defiance of a contractual mandate for arbitration.

Under that circumstance, companies might require individual workers to sign agreements to limit their discrimination claims to arbitration.

“I just don’t think the employer is going to get much under this interpretation, and that will hurt employees,” Kennedy said.

The case is 14 Penn Plaza LLC, et. al. v. Pyett, et. al., Docket No. 07-581.

—Mark Schoeff Jr.

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U.S. employees’ savings rates into 401(k) plans was 7.8 percent for the first 10 months of the year, down from 8 percent in 2007, despite the average account balance dropping 14 percent to $68,000, according to a new Hewitt Associates study.

Participants lost 18 percent of their account value in September and October alone.

Overall withdrawals from 401(k) plans were 6.2 percent for the first 10 months of the year, up from 5.4 percent in 2007. The increase came from hardship withdrawals—up 16 percent in the first 10 months of the year. Four percent of employees terminated their 401(k) contribution.

Loan usage was 22 percent for the first 10 months of the year, unchanged from 2007.

The study was based on data collected from 2.7 million 401(k) participants, said Hewitt spokeswoman Catherine Brandt.

Filed by John D’Antona Jr. of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Before voting on aid to ailing automakers, Republicans in the Senate will take aim at the United Auto Workers and some benefits that many Americans find excessive.

Sen. Kit Bond, R-Missouri, a moderate hoping to help Detroit, told Automotive News the UAW will have to join auto executives in making sacrifices. Likely to be targeted by Bond and other Republicans is the Jobs Bank—the UAW equivalent, in the public’s mind, of corporate jets.

“Management, workers and investors are going to have to make sacrifices if they truly want to turn around their companies enough to earn taxpayer help,” Bond told Automotive News last week in an e-mail.

The Jobs Bank requires the Detroit Three to pay nearly full wages to hourly workers who have been laid off. Although the number of workers in the Jobs Bank has dwindled, the concept has become a powerful symbol of U.S. auto industry excess.

General Motors is likely to propose its elimination, says a source familiar with the company’s thinking.

Last week Bond did not spell out precisely which concessions he expects from the UAW. But during the congressional debates, many GOP lawmakers singled out the Jobs Bank as a wasteful Detroit Three practice.

The UAW was notably missing from a list of stakeholders that congressional Democrats expect to make sacrifices in return for emergency loans. Those sacrifices were detailed in a November 21 letter from Senate Majority Leader Harry Reid, D-Nevada, and House Speaker Nancy Pelosi, D-California.

Republicans seem certain to address that oversight in a Thursday, December 4, Senate hearing. The House is scheduled to discuss the bailout Friday, December 5.

The Bush administration supports Bond’s bill, which is co-sponsored by Sen. Carl Levin, D-Michigan. Administration officials said last week that the companies’ viability plans must address “labor, management and legacy costs.”

Democrats control both houses of Congress, but Senate Republicans could block an aid bill with a filibuster. Bond and other Republican Senate moderates—some of whom already have endorsed Bond’s bill—seem certain to be crucial “swing” votes.

And during hearings last month, Republican senators asserted that union givebacks are fundamental to any Detroit Three aid plan.

“The enormous costs in union-required benefits are unsustainable,” said Sen. Elizabeth Dole, R-North Carolina. “Renegotiating these contracts would be essential if there were to be hope of keeping these companies afloat.”

Added Sen. Robert Bennett, R-Utah: “Hourly workers are going to have to have their contracts renegotiated, and some of them are going to lose their jobs.”

Bank shot
The Jobs Bank costs the Detroit Three automakers $478 million a year, estimates Mark Perry, an economics professor at the University of Michigan-Flint. Even if that program is eliminated, the union may be asked to accept additional concessions to fulfill Congress’ notion of shared sacrifice.

Himanshu Patel, an auto industry analyst with JPMorgan, calculated the concessions necessary for General Motors to break even at an annual industry sales rate of 13 million vehicles.

Patel assumed that financial concessions would be split evenly between GM’s unions and creditors. With that in mind, he concluded that average wage-and-benefit costs would have to drop from $60 an hour to $44.

On November 10, GM chief executive Rick Wagoner told Automotive News that he was not inclined to reopen the company’s labor contract. Last week, company spokesman Greg Martin said GM’s plan would reflect “shared sacrifice,” but he declined to comment on labor provisions.

The union did not respond to a request for comment.

‘Only game in town’
Democrats have a 50-49 advantage in the Senate, counting two independents who generally vote with Democrats. Sixty votes are needed to avert a Senate filibuster and pass controversial measures.

Bond told Automotive News that his aid proposal is “the only plan that has a chance to be signed into law.” It would convert a pool of $25 billion already approved for factories to retool for fuel-efficient vehicles into emergency loans for the Detroit Three. The compromise would replenish the retooling program later.

In addition to Bond and Levin, the bill is co-sponsored by Democrats Debbie Stabenow of Michigan, Sherrod Brown of Ohio and Robert Casey Jr. of Pennsylvania, as well as Republicans George Voinovich of Ohio and Arlen Specter of Pennsylvania. Voinovich calls the measure “the only game in town,” an aide told Automotive News last week.

A senior congressional staffer close to the issue predicted the bill would get more than 60 Senate votes. The bill could come to a vote as early as next week.

Democratic congressional leaders object to a diversion of the retooling money. Instead, they want to carve out $25 billion in loans to the Detroit Three out of the $700 billion bailout fund for financial institutions. The Bush administration rejects that approach.

The Senate Banking Committee and the House Financial Services Committee have scheduled hearings this week on the Detroit Three plans. If Congress accepts the plans, lawmakers would consider aid legislation next week.

Filed by Harry Stoffer of Automotive News, a sister publication of Workforce Management. Jamie LaReau contributed to this report. To comment, e-mail editors@workforce com.

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Even amid the economic concerns nationwide, 70 percent of employers rate the job market as good or very good for 2009 graduates, according to a recent study by Bethlehem, Pennsylvania-based National Association of Colleges and Employers, which has been tracking the potential job market for graduates since the late 1980s.

The study also noted that employers believe they’ll be hiring about as many graduates as they planned to hire in 2008. 

Yet this relatively positive prediction comes with a caveat.

“We typically survey our employee members in August,” said Andrea Koncz, employment information manager for NACE. “When we went out in August, they planned to hire about 6 percent more graduates in 2009. And right about the time we were releasing the report, everything started happening with Wall Street and there were some company collapses. So we went back out before releasing the survey and found that companies don’t plan to increase the number of college graduates they plan to hire.”

Truth be told, she said, there will likely even be a slight decrease. But along with the potential for economic recovery, she expects the number of college grads hired in 2010 will jump tremendously.

While the numbers aren’t as glossy as they were for 2008’s graduates, there’s some optimism for the class of 2009. In the 2008 survey, the majority of respondents rated the job market for graduates as very good at 49 percent, while 31 percent rated it as good. The 2009 outlook showed 26 percent rating the job market for graduates as very good and 44 calling it good.

A major reason, Koncz said, is that companies are preparing for the future. They want to bring in college graduates and mold them into company leaders.

Koncz’s belief is echoed by San Francisco-based Pacific Gas and Electric Co. According to Shelly Morris, director of talent acquisition at PG&E, developing leaders is one of the top reasons for stepping up the company’s college recruiting efforts.

But for PG&E, there is also a necessity to bring younger talent into an environment that primarily consists of an aging workforce. The company is rebuilding its college recruiting program to ensure there is a consistent pipeline of talent available.

Even in 2009, PG&E is bullish on college recruits.
 
“The utility industry as a whole has an aging workforce, and we need to make sure we have college talent entering our workforce. We wouldn’t have any long-term competitive advantages if we were to scale back on our college recruiting efforts right now,” Morris said.

PG&E is hardly alone. Koncz said that as baby boomers begin to retire, companies and recruiters will need to look even more closely at colleges and universities for talent. And in the present economy, she suggests that 2009 grads should be top of mind.

“The benefit [of hiring college graduates] is to get them early in their careers to train and mold them. Their salaries are also a lot lower than hiring experienced candidates,” Koncz said.

On the flip side, college grads traditionally have a higher turnover rate. “The average time a college grad will stay with PG&E is about five years,” Morris said.

That’s not an argument against college recruiting. Morris said it’s a key reason for companies and recruiters to develop college recruiting programs and keep future grads in the pipeline.

—Jon Hindman

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Employers must offer same-sex couples who are legally married outside New York state the same employee benefits as they extend to opposite-sex married couples, the New York Insurance Department has ordered.

Under a bulletin issued Friday, November 21, by Insurance Superintendent Eric Dinallo, any employer that fails to recognize the marriages of same-sex couples legally performed in other jurisdictions will be in violation of state laws prohibiting discrimination.

Insurers also are required to provide the same coverage treatment to same-sex legally married couples as to opposite-sex married couples, Dinallo’s order states. If not, they will be considered in violation of insurance laws prohibiting discrimination.

The bulletin, known as a Circular Letter, was issued in response to an inquiry to the department that was precipitated by a February 2008 decision by a New York state appellate court in Martinez v. Monroe Community College. The court found the plaintiff and her same-sex partner were entitled to recognition in New York state as legally married for purposes of receiving employer-provided benefits.

The plaintiff, Patricia Martinez, had filed the lawsuit after her employer denied her application to obtain health care benefits for her same-sex spouse, whom she had married in Canada. The employer’s attempt to appeal the ruling was denied.

(For more, read “The Future of Diversity: Changing Focus, Practices Can Create New Business.”)

Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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U.S. companies could face a pension contribution tab of $40 billion thanks to this year’s financial crisis.

Plus, the falling markets have corporations looking at an expected combined pension deficit of well over $200 billion, their worst ever.

But for many companies the situation, while dire, isn’t desperate; they have a war chest of cash giving them the ability to pay increased contributions, and they might even be able to put off paying them for a year or more under pension funding rules.

The funded status of the U.S. defined-benefit plans of companies in the Standard & Poor’s 500 index was 86 percent. That means an aggregate underfunding of $160 billion as of mid-November, estimated Michael A. Moran, vice president-portfolio strategist at Goldman Sachs Group in New York.

In contrast, at the end of 2007, the U.S. plans of the S&P 500 companies were 108 percent funded for a surplus of $95 billion, he said.

Contributions for 2009 for these companies could approach $40 billion because of the huge swing to underfunding, although Goldman Sachs hasn’t made an official estimate yet, Moran said.

In 2007, the S&P 500 companies contributed a combined $26 billion, he said.

Alan Glickstein, senior retirement consultant and actuary at Watson Wyatt & Co. in Dallas, said, “What companies will definitely feel is the legal requirement for pension contributions” kicking in this year under the Pension Protection Act of 2006.

“That’s going to be painful for some plans, which is why many of them have asked for relief from minimum funding requirements” under the law, Glickstein said.

Prompted by a plea from a coalition of 298 corporations, labor unions and trade groups asking for funding relief, the leaders of two Senate committees—the Senate Finance and Health, Education, Labor and Pensions committees—reached an agreement November 19 on a bipartisan proposal to provide funding relief to corporations by modifying the Pension Protection Technical Correction Act of 2008.

That legislation passed by the Senate in December 2007 and the House in July of this year but has not been reconciled or enacted. The modified bill relaxed some requirements for both single- and multi-employer pension plans under the PPA. Jason Hammersla, director of communications at American Benefits Council, said the Senate and House adjourned November 20 without taking up the modified bill.

Possibly record-setting
Looking at both the U.S. and non-U.S. plans of the 348 companies in the S&P 500 with defined-benefit plans, the aggregate deficit could be higher than the $219 billion deficit in 2002, the highest on record, said Howard Silverblatt, senior index analyst with S&P in New York. (For more, read “$4 Trillion Lost Worldwide by Pensions Funds in 2008.”)

That would be a swing of almost $300 billion, wiping out the aggregate $63.3 billion in overfunding the S&P 500 companies (combining U.S. and non-U.S. plans) had at the end of 2007, Silverblatt said.

Said Adrian Hartshorn, senior consultant in the financial strategy group of Mercer, New York: “It’s been a difficult year. The funding levels will be substantially down from where they were in 2007. We’re expecting a fairly substantial number [of corporate pension plans] to be underfunded.”

The hit to funding levels is entirely a result of the collapse in returns on the asset side, those interviewed said. Because of rising interest rates—especially the wide spread between corporate and Treasury bonds—pension liabilities have fallen, offsetting somewhat the drop in pension assets.

“Pension funds typically have between 60 percent and 70 percent of assets invested in equities,” Hartshorn said, extrapolating an estimate of underfunding. “Equities are down 40 percent year to date. That [decline] translates to a 30 percent loss on the asset side.”

The sharp losses will lead to a reconsideration of pension investment strategy, he said.

“Companies need to understand risk,” he said. “If the risk they are assuming is too high for a company’s business, they need to mitigate it. They need to re-evaluate policy goals of the risk they are taking to achieve full funding status,” he said.

If the high volatility of the market is too much for a company to withstand, executives need to look at some sort of liability-driven strategy, where assets are invested generally in fixed income in a way to match the interest rate sensitivity of pension liabilities.

October was the worse month for pension assets in the eight-year history of the Milliman Inc. index of the largest 100 corporate pension plans.

In October, the net asset return for those pension plans was -21 percent, in contrast to the annual expected return of 8.3 percent, according to John Ehrhardt, principal and consulting actuary at Milliman in New York.

Ehrhardt estimated those plans lost more than $120 billion in October. Offset by gains in pension liabilities, the funded status dropped $58 billion in October.

As a result, the combined funded status of those companies as of October 31 fell to 92.7 percent from 104.9 percent as of the end of 2007, Ehrhardt estimated. The total value of pension assets of the Milliman 100 was $986 billion as of the same date, down from $1.106 trillion at the beginning of the month. At the same time, pension liabilities fell by $62 billion to $1.064 trillion.

Ehrhardt attributed the decrease in pension liabilities primarily to the rise in the discount rate to 8.45 percent in October from 7.63 percent in September.

Besides causing big expected increases in cash outlays for pension contributions, the rise in pension underfunding will hurt corporate financial statements and shareholders.

“There will be a lot of [pension] asset losses,” Moran said. “It’s going to be immediate and it’s going to look ugly,” he said of the impact on the balance sheets, which will appear in corporate 10-K statements after the beginning of the year.

Ehrhardt projects a reduction in corporate earnings for 2009 of $40 billion because of the pension plan losses. (For more, read “Retirement Out of Reach.”)

Filed by Barry B. Burr of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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In an unexpected move, Wal-Mart Stores appointed Michael Duke to serve as its new president and chief executive—a position that could make him one of the country’s highest-paid executives.

Duke, who has headed up Wal-Mart’s international division, will replace Lee Scott early next year as the company’s top executive. Scott is retiring at the end of January after nine years as president and CEO, but he will hold on to his role as chairman of Wal-Mart’s executive committee.

That means that Duke is in line for a substantial bump in pay. Last year, he earned $13.3 million in total compensation, about one-third of the $31.5 million that Scott took home.

Wal-Mart has not yet disclosed a new employment agreement for Duke, who had a base salary of $975,000 last year. But the company did reveal in an 8-K filing Friday, November 21, that once Scott begins to serve solely as chairman, his base salary will be reduced to $1.1 million annually, down from the $1.4 million he earned for the company’s fiscal year ended January 31.

In addition, Scott will no longer be eligible to participate in the company’s incentive plan for executives, according to the filing.

Scott apparently decided to retire now because the retailer is on firm footing. In a memo to Wal-Mart workers, chairman Rob Walton said that for a CEO transition, “the right time is now, a time of strength and momentum for our company.”

Wal-Mart’s earnings increased about 10 percent in the third quarter, making it one of the few companies to exceed expectations during the period.

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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When Goldman Sachs Group CEO Lloyd Blankfein and CFO David Viniar—along with five other top officers at the firm—announced last week that they’ll give up their bonuses for this year, their gesture may have marked the beginning of a $1 billion swing in pay at major financial institutions.

Goldman’s top brass will earn just their annual base salaries this year, which, at around $600,000 each, would register as little more than a rounding error on their typical total-compensation packages.

It also means that the seven executives as a group will be taking home nearly $320 million less than they did last year, when Goldman generated record revenue and earnings and the rest of the financial services world was still deemed to be on firm footing.

Goldman has paid its executives more than any other financial institution in recent years—by a wide margin. Since going public in 1999, its top tier has received roughly $1.1 billion in bonuses and incentives.

The move to forgo bonuses this year—a period in which Goldman’s earnings have dropped substantially, its share price has plunged 70 percent and its capital infusion from the federal government has totaled $10 billion—has set the stage for other financial behemoths that have suffered similar or worse fates to follow suit.

Nine of the largest financial institutions (including Goldman) paid their top executives a combined $1 billion in total compensation last year, according to a Financial Week analysis of the proxy filings of Bank of America, Bank of New York Mellon, Citigroup, JPMorgan, Merrill Lynch, Morgan Stanley, State Street and Wells Fargo. (These were the first nine financial institutions to receive a combined $125 billion in capital last month from the Treasury Department as part of the Troubled Asset Relief Program.) Roughly 98 percent of this $1 billion in pay was handed out to the top executives at these firms in the form of bonuses and other incentive awards last year.

Even before Goldman’s leadership volunteered to give up their bonuses, it was clearly shaping up to be a miserable year for bonuses in the financial services industry.

“But now, Goldman’s move has put enormous pressure on its peers to accept nothing but a base salary this year as well,” said David Schmidt, of compensation consultancy James F. Reda & Associates. “They’ve set the standard—and everyone else will fall in line.”

Already, overseas banks Barclays and UBS have followed Goldman’s lead and announced last week they would forfeit any bonuses this year.

UBS also noted it will overhaul its executive compensation model next year. Bonuses will not be paid to UBS executives right away but will be held in escrow, a move that would allow the company to claw back pay after it has been awarded.

In the U.S., pressure has been mounting, particularly on Citigroup and insurer American International Group, to make a similar move. New York state Attorney General Andrew Cuomo, for one, publicly called out executives at both companies last week after Goldman’s revelation.

“After four consecutive quarterly losses, it seems only fair that top executives should shoulder their fair share of these difficult economic times,” Cuomo asserted after Citigroup announced November 17 that it would eliminate about 52,000 jobs. “It would send the wrong message for Citigroup’s top brass to collect bonuses while investors, taxpayers, and now Citigroup’s own employees suffer.”

At Citigroup, which received $25 billion in capital from the Treasury last month, top executives received nearly $65 million in bonuses and stock awards last year, according to its 2008 proxy filing.

AIG, which lost $25 billion in the third quarter and has needed $150 billion in financing from the Treasury, dished up roughly $28 million in bonuses and incentive payments to its top officers last year, according to its proxy filing.

It’s unclear what executives at these and other financial companies would be entitled to if they do end up collecting bonuses this year, but certainly it would be a fraction of what they took home in 2007.

In Goldman’s case, top executives turned down year-end payouts that could have amounted to more than $50 million combined, according to a Financial Week analysis of Goldman proxy filings and annual reports since 1999.

Goldman has never awarded its executive officers bonuses that totaled less than 1.3 percent of earnings since it became a publicly traded company, according to the analysis.

The lowest total level of annual bonuses that Goldman has awarded its officers: $43.8 million in 2002, when the company generated $3.3 billion in earnings on $14 billion in revenue, virtually unchanged from its 2001 earnings number.

So far this year, Goldman has reported $23.8 billion in net revenue and $4.4 billion in pretax earnings through the first nine months of the fiscal year that ends November 28.

It is widely expected to post a loss for the fourth quarter—its first loss since going public. But Goldman’s top tier still could have lined up for bonuses totaling $57.2 million, if the year-end payouts were based on the historically low 1.3 percent-of-earnings benchmark.

“This could just be a one-time gesture, given the economic climate and the [political] circumstances surrounding a number of banks and financial institutions,” said Jim Allen, senior policy analyst at the CFA Institute. “But there’s a chance it could be reflective of a new compensation model at financial firms, one that takes a longer-term view and is essentially risk-based. That would be much more significant.”

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The bottom isn’t falling out of the HR technology market, according to a recent survey from the International Association for Human Resources Information Management professional group.

Forty-two percent of the nearly 210 respondents reported that their human resources information technology budgets will remain the same in 2009 as in 2008, the association said in a release Friday, November 21. Another 21 percent of participants said budgets will increase by an average of 23 percent, while 37 percent said their budgets will decrease by a median of 15 percent.

“For companies in a good financial and cash position, they should take this opportunity to extend their market share and make long-term investments,” John Greer, senior vice president for HR and Development at Smart Financial Credit Union and incoming chair of IHRIM, said during a Web conference event Nov. 19. “Those without as much cash are waiting to see what happens. There is still a lot of uncertainty right now.”

The HR software market has been among the fastest-growing corners of the business software world as organizations seek to maximize the value of their people and prepare for any labor shortages. Talent management applications—which refer to tools for key HR tasks such as recruiting and employee performance management—have been particularly hot.

But there’s evidence HR software vendors are facing tougher going. This month, Kenexa said its third-quarter net income slipped by 24 percent to $5.4 million. Kenexa chief executive Rudy Karsan also said that during the last several weeks of the quarter, “the business environment deteriorated further and caused customers to pause as they evaluated how the changing economic climate would impact their business.”

IHRIM’s survey involved HR leaders, primarily from North America. It covered HR IT as well as other talent investment issues.

Thirty percent of respondents plan to spend the most on software purchases in 2009, followed by outsourced services, staffing and development at 20 percent each. Companies making software investments will spend the most on onboarding tools (28 percent) and benefits management products (25 percent), and less on core HR management systems (12 percent), the survey says.

Forty percent of those surveyed plan to make the largest budget cuts in training and professional development.

Greer argued that slashing development budgets is shortsighted and counseled against drastic job cuts.

“Companies are likely to lose their competitive advantage if they cut development budgets,” he said. “I am hopeful that companies do not make dramatic headcount reductions until they have a better feel of where economy is going.”

—Ed Frauenheim

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In a sign the job market in the Big Apple is deteriorating, 70,000 New Yorkers received unemployment benefits in October, a 5 percent increase over the month before and the most in more than four years.

Compared with a year ago, the number of people on unemployment in October rose by nearly 20,000, or 37 percent, the sharpest year-over-year increase since May 2002, the New York State Department of Labor said Thursday, November 20.

On the heels of massive layoffs announced by Citigroup this week, the Labor Department’s monthly report brought little in the way of good news. The unemployment rate in October did decrease by 0.1 percent, to 5.7 percent, but economists said that slight drop was statistically insignificant.

The city lost 7,000 private-sector jobs in October, the largest one-month loss in the recent downturn, according to a seasonal adjustment of Labor Department data by Eastern Consolidated.

While the depth of losses in any one industry was not significant, the pain was spread around the city economy.

Health services, retail trade, manufacturing, construction, banking and employment services all saw losses.

“The loss of jobs in November clearly indicates that New York City has entered a recession,” said Barbara Byrne Denham, chief economist at Eastern Consolidated. “The anecdotal evidence had been overwhelmingly indicative of a recession these past few months, and now the numbers are finally starting to support the anecdotes.”

Surprisingly, the city lost only 700 securities jobs last month, despite announcements that indicate massive layoffs. Economists theorize that many laid-off Wall Street workers are still being carried on payrolls because of severance packages.

“What we’re expecting to see is a snowballing in securities, and we haven’t seen it yet,” said Marcia Van Wagner, the city’s deputy comptroller for budget.

Information technology cutbacks resulted in 600 jobs being shed from the computer systems sector. As many as 165,000 jobs could be lost in the city over the next two years as the financial crisis spreads beyond Wall Street, according to a forecast by comptroller William Thompson.

The city continued to post over-the-year job gains, growing at a rate of 0.2 percent, while the state and the nation lost jobs. Educational and health services continued to lead the way, with gains also seen in leisure and hospitality.

But the rate of growth slowed from 0.6 percent in September and weakness in key sectors is a portent of trouble on the horizon, said James Brown, a Department of Labor economist.

“It’s dwindling fast,” he said. “You’d expect big growth in retail, leisure and hospitality, but they have been unusually weak. That’s a sign that we’re going to have a poor Christmas season.”

Filed by Daniel Massey of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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