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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.


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January 30, 2009


Layoffs: The new problem?

Across the United States and Europe there was a wave of layoff announcements this week, with more than 70,000 job cuts announced on Monday alone. Another 11,500 job cuts were announced on Tuesday, bringing the total to a little more than 200,000 layoffs announced during the first month of the year (announced layoffs January 2009). Also, the U.S. Bureau of Labor Statistics (BLS) reported Wednesday that job losses in December 2008 associated with mass layoff events (those that involve at least 50 initial claims for unemployment insurance) were up 55 percent versus a year earlier. During January, layoffs have spread to more industries and to companies from Microsoft to Starbucks to the world's largest manufacturer of construction equipment, Caterpillar, all of whom announced layoffs this week.

While layoffs have received quite a bit of attention, they were only part of the story of labor market problems in 2008—which makes the accelerating layoff reports especially bad news.

According to the latest data from the BLS Job Openings and Labor Turnover Survey (JOLTS), the layoff rate (as a percent of total employment) increased from 1.3 percent at the start of the recession in December 2007 to 1.6 percent in November 2008. Over the same period, the rate at which workers quit their jobs declined from 1.8 percent to 1.4 percent—likely a result of uncertain job prospects. On net, the overall rate of job separation toward the end of 2008 was similar to what it was at the beginning of the year. The total number of separations stood at about 4.3 million in November 2008, compared to 4.4 million in December 2007.

While the rate of total separations was relatively steady during 2008, a more notable change can be seen in the hiring rate (as a percent of total employment), which declined from 3.4 percent to 2.6 percent. The level of hiring is estimated to have been about 3.5 million in November 2008, compared with 4.7 million in December 2007.

The chart below highlights the rapid decline in hiring relative to layoffs.

013009a

Not only have firms been letting people go, they apparently have taken down the help wanted signs at an even faster rate. As a result, the unemployed have fewer employment options, and this development has exacerbated the duration of unemployment. From the BLS household survey, in December of 2008 the average duration of unemployment was 19.7 weeks, compared with 16.5 weeks in December of 2007. This lengthening in the duration of unemployment is also reflected in the Department of Labor weekly claims data released yesterday that showed the four-week average number of continuing claimants for unemployment insurance at 4.63 million during the week of January 16, compared to 2.65 million in mid-December 2007 (see the chart below).

013009b

Unfortunately, the growing indication is that "furlough, wage reductions, hiring freezes and shorter hours simply did not do enough" to deal with weak business conditions. Barring a pick-up in job creation—which is unlikely given the recent pattern of continuing claims for unemployment insurance—it is hard to paint a very positive portrait of the labor market in the near term.

By Menbere Shiferaw and Sandra Kollen, senior economic analysts at the Atlanta Fed

January 30, 2009 in Data Releases , Labor Markets | Permalink

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Comments

No jobs equals no recovery. In a world suffering from 'over-capacity' (as well as too much debt) we see the absurdity of attempting to re-capitalize the banking system.

All economies are local. Until the currency manipulation stops, there will be no economic recovery.

Do not delude yourself into thinking the general public does not recognize this, to do so invites revolution.

Posted by: Gegner | January 31, 2009 at 05:48 AM

Here's 3 job sites from about.com's top ten job sites-

www.linkedin.com (professional networking)
www.indeed.com (aggregated listings)
www.realmatch.com (matches jobs based on your skills)

good luck to those looking.

Posted by: susan | January 31, 2009 at 02:16 PM

My own view is that, starting in late November, businesses starting shedding jobs proactively:

http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE50P5OS20090126

"It's hard to estimate when markets will bottom and then how long they'll be there," Cutler said in an interview. "The management team has been through multiple recessions, and knows you have to attack cost structure very early. If you don't attack them early, you can never get ahead of them."

Is there any way that I can gauge this thesis?

Posted by: Don the libertarian Democrat | January 31, 2009 at 10:47 PM

The graphs suggest a "depression" - namely, surplus out-of-work labor. Bureaucratic group-think like BLS distinctions between those still "looking-for-work" and those who have "given up" are meaningless [given up to what? crime? starvation? suicide?]. Gee - remember "creative destruction"? - it was supposed to replace destroyed jobs. Well, all we have now is destruction. When we come out of this we will have another post-depression generation: the 50 to 20-somethings will walk away from capitalism/finance/mercantilism as it exists today. The current seismic financial events really will redirect the relationship between worker and job. I'm not a socialist/communist but I sense that "free market" capitalism is done for in the USA for about 5 decades. The worker lives longer than the corporation these days - it is the generational memory that will call the shots in the future. In some form there will be a resurgence in "worker solidarity" - whatever that means. Mercantilims will naturally try to restrict labor union activities. The worker of tomorrow won't be interested in contesting labor/management issues. Deep-rooted cynicism and the social acceptance of widespread under-employment and consumer gadget poverty will mean they'll just walk away from supposedly attractive opportunities.

Posted by: Bruce H | February 02, 2009 at 01:17 AM

an interesting article, thanks. This one that appeared in the Nation, recently, seems to point to a new way of looking towards our future economy. I'd be curious to hear more economists and blogs talking about these type of ideas. http://www.thenation.com/doc/20090209/barber

Posted by: AlbertKaufman | February 02, 2009 at 02:16 PM

Oh yeah, and it ain't over when they tell you it's over. My boss told us all who survived last week's decimation to clean up our work areas and don't leave anything around that would be a real pain if he had to pack it up and ship it to us at home, get the personal stuff out of the office now.

Just, you know, to save him a little trouble just on the off chance the management decides to cut another ten percent, because it was _so_ hard boxing up the crap from the 20-year people laid off last time who'd accumulated SO much garbage around their work areas that was personal.

And breakable. And easy just to throw in boxes or leave for the vultures.

Threaten much?

Posted by: me | February 03, 2009 at 11:10 PM

This piece, like many on macroblog, focuses on the predictive power of certain economic data. As such, this data is harrowing because it so strongly suggest a longer, deeper recession. But of more interest for a policy maker is the "why" of this data, or, in other words, can we posit and prove the causation of this recession which even a casual observer knows to be qualitatively different than earlier, post WW II US recessions.

Is a possible cause the same as the Great Depression, i.e. an extraordinary inequality in income, except that the inequality must be measured world-wide, not US-wide. If we look at incomes in China, India and other less developed countries making consumer goods for the United States market, would we not see not only income inequality within their own economies, but also rather stark contrasts with the income of the developed world? Perhaps this is the systemic source of inadequate consumer demand and a market doomed to severe "correction."

Hence, maybe old economic lessons give new explanations for the current recession that grips the world, not just the U.S.labor force.

Posted by: mme | February 04, 2009 at 07:06 AM

An equally disconcerting, and new, pattern is the sheer number of Wage Reductions being announced almost daily, whether direct across-the-board cuts of -5% or more, or in the form of mandatory 2-day per month furloughs, effectively a -10% wage cut, as affects California's 300,000 State employees.

In downturns there are generally many layoffs, but I can not recall a time of so many reductions in wages.

So far, Demand is weak because of economic uncertainty and risk-aversion. But with more unemployed, and especially, those still employed with less discretionary $, Demand could be further weakened. The risks of a deflationary spiral are high.

Posted by: Murph | February 05, 2009 at 04:33 PM

I noticed that your unemployment claims chart is seasonally adjusted. How does that relate to the hirings chart that showed a large downward movement in hirings during the holiday season? Are seasonal jobs not mentioned in the hiring information?

Posted by: Ian | February 11, 2009 at 04:05 PM

Our economy will soon recover from economic crisis, just look at the positive side. We can see that the video games industry continue to progress.

Posted by: wow gold | March 26, 2009 at 03:47 AM

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