Sunday, November 16, 2008
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.
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:
- Fidelity Will Eliminate 1,700 More Jobs in Early 2009
- Sun to Cut up to 6,000 Workers Amid Financial Crisis
- Credit Suisse Said to Plan Job Cuts, a Fund Unit Sale
- Nokia Lowers Market Growth Outlook as Spending
"On Nov. 4, Nokia said it may cut as many as about 600 jobs in marketing and research to improve efficiency."
- RBS May Eliminate Up to 3,000 Jobs in Securities Unit
- QVC Cuts 5.8 Percent of U.S. Jobs in Cost-Cutting Bid
"QVC Inc., the home-shopping channel controlled by cable billionaire John Malone, said it will eliminate 700 jobs, or about 5.8 percent of its U.S. workforce, as part of a cost-cutting drive."
- BT to Cut 10,000 Jobs; Second-Quarter Profit Falls
"Most of the 10,000 cuts [6% of its labor force], out of a workforce of 160,000, will be ``indirect labor'' such as agency workers, contractors, subcontractors and offshore employees, the company said in a statement today."
- Chrysler in Crisis, Needs U.S. Aid, Nardelli Says
"Chrysler has announced the elimination of 35,000 jobs since February 2007, including plans to trim as many as 5,000 salaried positions by the end of this year."
- Citigroup to cut 10 percent of jobs: source
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.