Over the past two months, the combination of declines in the U3 unemployment rate, increases in the ADP employment numbers and a drop in new claims for unemployment (aka jobless claims) has some in the mainstream media touting that the end of the Great Recession is in sight. That could well be but fortunately, the Bureau of Labor Statistics (BLS) provides us with even more data to chew on, namely, the rather frighteningly entitled "Mass Layoffs" news release. This report seems to get very little coverage in the mainstream media but for those of us that have gone through periods of what is politely and innocuously termed "downsizing", the mere threat of a layoff is enough to cause various bodily sphincters to clench involuntarily.
For January, 2011, according to the BLS, there were 1534 mass layoff actions (seasonally adjusted) in that month alone involving 149,799 workers with each of the 1534 layoff actions involved at least 50 workers from a single employer. When compared back one month to December 2010, the number of mass layoffs rose by 51 events and the number of initial claims increased by 11,807.
Here is a graph showing both the number of mass layoffs for the past 5 years and the number of initial claimants for the past 5 years, both seasonally adjusted:
Quite clearly, the number of mass layoffs has decreased by roughly 50 percent from its peak in early 2009 but you'll notice quite quickly that the number of layoffs has not decreased markedly over the past year (once again, despite the looming and ever-promised end to the Great Recession) and that the number is still elevated by about 40 to 50 percent from the period of time prior to the onset of the Great Recession. That's some recovery, isn't it?
The numbers look even worse when they aren't put into the magical black box that seasonally adjusts data. For January 2011, the number of mass layoff events was 2558 (a 66.8 percent increase over the seasonally adjusted number) and the number of newly minted redundant employees was 246,463 (a 64.5 percent increase over the seasonally adjusted number). On a year-over-year basis (non-seasonally adjusted), compared to January 2010, the number of mass layoffs was down by 302 and the number of initial claimants was down by 32,216.
Here is a chart showing the distribution of new claimants by industry for the top 10 worst offenders:
The manufacturing sector in the United States is still suffering mightily. Despite the length of the recession and the increase in consumer spending, manufacturing layoffs still accounted for 27 percent of all mass layoff events and 30 percent of initial claimants. This is slightly down from last years 34 percent of events and 38 percent of initial claimants. The hardest hit sectors of manufacturing were in transportation equipment and food. That’s not a terrible surprise – well, maybe the food industry was a bit unexpected.
Geographically, the highest number of initial claims were found in California, New York and Pennsylvania. Interestingly enough, the de-industrialized belt experienced the largest year-over-year decreases in initial claims - that means you Michigan, Ohio and Illinois. Perhaps job cuts over the past decades have already pretty much decimated the employment pool in those areas.
As seems to be a rule of thumb for all things economic, there is more than one source of data and more than one way to present that data. Here is another reference for layoff data provided by Challenger, Grey & Christmas, Inc., an executive outplacement company headquartered in Chicago. This week, they released their planned layoffs data showing that employers planned to increase their job cutting to 50,702 in February 2011, the highest total since March 2010 and the second month in a row that increased layoffs were planned. The job cuts for February were up 32 percent from January's 38,519 and 20 percent higher than the 42,090 planned for the month of February 2010. This is the first year-over-year increase in monthly job cuts since May 2009, during the height of the Great Recession.
The largest portion of layoffs in February came from local and state government and non-profit employers which announced job cuts totalling 16,380 positions, up 196 percent year-over-year. On top of local and state level cuts, the United States Postal Service announced that it has cut 5600 positions. Despite data showing that consumers are cracking open their wallets once again, the retail sector is coming off second worst with a planned increase in job cuts of 44 percent to 8360 in the month of February, up from 5755 in January.
The Challenger, Grey & Christmas report shows that year-to-date layoffs for the first two months of 2011 have been the worst in Michigan (8985 workers), California (7150 workers), Illinois (6122 workers) and the District of Columbia (5946 workers).
The layoff situation is only going to get worse as we move forward. Two factors are working against American workers; the first factor is rapidly rising energy and commodity input costs which, in large part, cannot be passed along to indebted and under water consumers necessitating cuts in operating costs (i.e. layoffs) to maintain profitability. The second factor working against American workers are the looming job cuts at the Federal level in the never-ending (or never-starting) battle to balance the budget deficit. his will have a marked impact on the economy as a whole since mass layoffs result directly in less consumer spending which result in even further layoffs in the private sector.
This thing just never seems to end despite what some of the data says, does it? To my untrained eye, it certainly doesn't look like the employment situation in the U.S. is going to return to historical norms any time soon.