An unprecedented storm is descending on the aerospace and defense (A&D) industry. A severe economic downturn has choked demand and financing for new aircraft, while military spending is leveling off and will likely decline under the Obama administration.

The good news is that corporate leaders appear to have learned a lesson from past downturns, when A&D companies laid off legions of employees and then had to scramble for technical talent when good times returned. While there have been massive layoffs in select pockets, such as the business jet sector, AVIATION WEEK's 2009 Workforce Study and data from the Aerospace Industries Assn. (AIA) suggest that U.S. A&D companies had cut about 30,000 jobs as of June 1, or just 4.5% of the total workforce.

The layoffs will almost certainly continue into 2010 as backlogs decline and the impact of weak demand intensifies. But companies are using salary freezes, furloughs, temporary shutdowns and other measures to avoid cutting more jobs. Interviews conducted for the workforce study suggest total job losses during this downturn might be limited to 10% of the A&D workforce -- far below the 40% eliminated in 1990-96 as the end of the Cold War and a subsequent drop-off in military spending triggered a massive consolidation of U.S. A&D companies.

And the industry is being much more strategic in reducing the workforce. The layoffs of the 1990s fell disproportionately on younger workers. That led, a decade later, to a demographic gap of mid-career workers who could fill key leadership positions. Corporate bosses vow they will not let that happen again and plan to keep hiring young talent.

Those were some of the revelations from this year's workforce report, which was undertaken by AVIATION WEEK in partnership with AIA, the American Institute of Aeronautics and Astronautics, the National Defense Industrial Assn. and Hitachi Consulting. Findings from the in-depth study, which has been conducted annually since 1997, were based on responses from 43 A&D companies with a total of 520,000 employees, about 80% of the industry's workforce.

Among other key findings:

--Holding on to highly coveted younger workers is especially challenging and requires companies to rethink the workplace. The voluntary attrition rate for employees with less than five years' experience was 16% last year, well above the average attrition of less than 10%.

--Companies are still hiring, albeit at a curtailed pace. The industry has 21,000 job openings now, down from 32,000 a year ago. Government agencies are planning to hire tens of thousands of A&D workers and managers. But industry executives warn that some openings could be duplicative as multiple companies count on winning the same contracts.

--While some companies report a decline in on-campus hiring, others are shifting more focus to universities and colleges. Frank Flores, a vice president of engineering for Northrop Grumman Aerospace Systems, said recently that more than 40% of his operation's new hires will be recent college graduates.

--Large companies are thus far maintaining internship programs through the economic downturn. But smaller organizations have had to bring on fewer interns and in some cases cancel internships this year.