EconoMonitor

The Wilder View

Mass layoffs set to explode

More bad news: the 2008/2009 recession will be worse than the 2001 recession as measured by the number of firms that are cutting jobs in bulk, 50 or more employees. Headlines suggest that this labor contraction will be marked by widespread mass layoffs.

mass_layoffs_chart.png

The chart illustrates monthly mass layoffs of private nonfarm payroll as a percentage of the total payroll reported by the Bureau of Labor Statistics for the period April 1995-September 2008 (the full series). Mass layoffs are job cuts of 50 or more workers during the month.

Since 1995, there has only been one recession, March 2001-November 2001, and although the labor contraction was prolonged until 2003 (the period of jobless recovery), the peak of mass layoffs occurred within the recession on September 2001, where 1.7% of the payroll loss their jobs on a mass scale (50 or more job cuts at a time). In September 2008, the number of mass layoffs as a percentage of the payroll, 1.5%, is just 0.2% shy of the 2001 peak, and anecdotal evidence suggests that mass layoffs are expected to rise markedly in 2008 and 2009. Here are few headlines since just November 12:

This list of expected labor loss is quite daunting. Anectodal evidence suggests that layoffs into 2009 will be big (mass in scale), broad-based (across all industries), and thus add up quickly. And with credit markets on red alert week after week, there doesn’t seem to be anywhere for the labor market to go but down even further.

This is going to be a very difficult time for unemployed workers, and according to the Herald Tribune (the global edition of the NY Times), the U.S. welfare infrastructure is not equipped to handle the oncoming severe contraction in the labor force. I hope that I am wrong, but after the very dismal October labor report, it seems that things have worsened substantially for the labor market.


Originally published on November 16, 2008 at News N Economics and reproduced here with the author’s permission.Enter your email address:

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2 Responses to “Mass layoffs set to explode”

GuestNovember 19th, 2008 at 7:19 pm

For sure it won’t. In non-union shops, any fat was cut long ago and they’re deep into real muscle already.

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