Most firms expect to cut workforce

Industry, Trade and Labor Minister Eli Yishai okays emergency plan to put 100,000 people back to work.

eli yishai 248.88 (photo credit: Ariel Jerozolimski)
eli yishai 248.88
(photo credit: Ariel Jerozolimski)
Every other trade and services company will have to cut its workforce next year as sales drop and profits shrink, according to a survey by the Federation of Israeli Chambers of Commerce released Wednesday. "The survey is testimony to the downturn in business activity over recent months," said Israela Many, deputy head of the FICC's economic research and tax division. "Our outlook for 2009 forecasts a 1 percent fall in private consumption and a 3% drop in the importing of goods. In our view, expectations for 2009 are even optimistic. Government activity and measures to assist the economy can minimize the damage to the business sector, especially companies in the periphery." The FICC survey was carried out among 160 trade and services companies across a variety of sectors, including communications, electronics, business services, food and medical equipment. It showed that 55% were expecting a reduction in the number of employees next year, with half of them planning to cut their workforce by 5%. The employment squeeze is mainly a result of projected lower sales and profits for next year. Nearly two-thirds of the surveyed companies expect profits to narrow next year, while 68% expect sales to suffer and 57% believe prices will drop. The surveyed companies expect the economy to grow at a rate of 4% before falling to a mere 0.5% in 2009. In its preliminary economic report on Israel released Tuesday, the International Monetary Fund cut its growth rate for 2009 to 1.5%. To cope with the continued waves of layoffs, Industry, Trade and Labor Minister Eli Yishai on Wednesday approved a national emergency plan that aims to put 100,000 people back into the labor market in 2009, while narrowing the number of income-support receivers by 20,000. Under the terms of the plan, formulated by the Israel National Employment Service and the ministry's job training division, 53,000 people will undergo personal training programs and 47,000 will undertake a first-job program. The program will focus on unemployment in hi-tech sector, in localities with a high unemployment rate of 10%-20% and encourage employment among haredim. In an effort to ease worsening global business conditions for exporters, David Artzi, chairman of the Israel Export & International Cooperation Institute, on Wednesday called upon Bank of Israel Governor Stanley Fischer to cut interest rates. "After two months of stability, the shekel-dollar exchange rate is falling back into volatility," he said in Tel Aviv at a conference of commercial attaches to Israel. "The governor will need to cut interest rates again, after the US cut its base lending rate to a record low on Tuesday. Otherwise, we will see speculators taking advantage of the situation." On Wednesday, the shekel-dollar exchange rate dropped more than 2% to NIS 3.75. "It is possible that over the next few days we will see a weakening of the US currency because of the Fed interest-rate decision," Giora Zarechansky, CEO of Direct Investment House, said at the conference. "In a time of a crisis the dollar is a good investment, and we estimate that the shekel-dollar exchange rate will move back above NIS 4. Over the next couple of months the Bank of Israel will continue lowering its base lending rate. At the end of this month we expect the central bank to cut interest rates by 0.5%." Trade and services companies surveyed by the FICC expect the shekel-dollar exchange rate to be NIS 4.02 at the end of 2008 and NIS 4.3 in 2009.