State and local governments expected to fire in bulk - mass layoffs will rise

Monday, December 22, 2008

November’s mass layoffs report - fifty or more initial claims for unemployment insurance benefits filed against an employer during a 5-week period, regardless of duration – was again grim. In bulk, mass job loss has gained some steam since September. Most of the mass layoffs are in the private sector (ex government), but rising state and local government budget deficits show the next shoe to drop in the labor market: government mass layoff events are expected to rise.

And as the pace of job loss quickens, mass layoffs (50 or more firings at once from one employer) accrue quickly.

The chart illustrates monthly mass layoff events of total and private nonfarm payroll reported by the Bureau of Labor Statistics for the period April 1995-November 2008 (the full series). Total and private nonfarm mass layoff events have reached levels not seen since 2001; and consistent with aggregate job loss, the pace of mass layoff events have quickened since September 2008, peaking in November at 2,328.

Since December 2007, 20,712 total mass layoff events sent 2.1 million workers to their state unemployment claims offices. The manufacturing sector continues to dominate mass layoff events – 39% in November – but the following industries saw record-level average mass layoff unemployment claim filings (since the series started in 1995): accommodation and food services; construction; finance and insurance; real estate and rental and leasing; retail trade; transportation and warehousing; utilities; and wholesale trade.

But federal, state, and local governments executed just 72 mass layoff events, essentially unchanged from the 70 events in November 2007. State and local governments are hoarding workers, but with surging budget deficits, the pace of government mass layoff events will rise. From the Wall Street Journal: click on chart below to enlarge.

The next mass layoff shoe to drop: state and local government jobs. From the LA Times:
Gov. Arnold Schwarzenegger on Friday ordered mass layoffs and unpaid furloughs for state workers starting in February to address California's growing fiscal crisis.

Under his executive order, 238,000 employees will be forced to take off two unpaid days per month through June 30, 2010. Managers will receive either the furlough or an equivalent salary reduction during the same period.
RW: And if the growing number of mass layoff events wasn’t bad enough, the rising pace of job loss is expected to tie up precious resources in the courts. From the LA Times:
Lured away from her job in Houston to take an executive position at Dell Inc., Jan Chapman persuaded her husband to quit his job, move with her to Austin, Texas, and buy a house at the height of the real estate bubble.

Seven months later, the computer maker laid off Chapman, whose 25-year career in human resources had been filled with flattering performance evaluations.

Chapman, 59, and three other top female managers have filed a class-action lawsuit against Dell, alleging age and sex discrimination in the company's termination of 8,000 employees over the last year.

The suit, filed in federal court in San Francisco, is one of only a few so far emanating from the mass layoffs sweeping the country.

But labor and employment lawyers warn that a tidal wave of wrongful-termination suits is expected in the coming months as the jobless burn through their savings, run up debt and find few work prospects in the worst economic downturn in decades.
State governments are running large budget deficits. California owns one of the most delinquent budgets, but others are following in suit (see chart).

Relative to 2001, 2008 has accrued 976 fewer mass layoff events through November, but with rising government layoffs – as in California – the 61 state and local government mass layoff events will swell. December's report may show accululated mass layoffs that exceed those in 2001.

Rebecca Wilder


Janie December 22, 2008 at 10:17 AM  

Interesting which states are in an OK position in both years. Alaska (Palin and oil), Texas (oil) and West Virginia (coal & Byrd).

Smack MacDougal December 22, 2008 at 11:52 AM  

Massive firings for states and local governments rightly should happen and shall become a boon for taxpayers in any future.

During the phony, giant credit-bubble expansion from September 2001 to August 2007, almost all employment expansion happened in the Public Sector through direct employment (government jobs) and indirect employment (tax money transfers to medicine, education).

Without such phony growth in employment during those years, much more vocal and violent protesting of the Iraq War could have happened.

The growth of Public Sector employment reflects a bad policy, a thoroughgoing bad allocation of resources as government workers do not produce wealth (things of worth), from which future things can come forth.

Until Americans get back to the business of making things that generate future things, thus producing Network Effects, politicians, bureaucrats and central bankers are going to make evermore Central Planning mistakes, wrongly collectivizing cash and spending masquerading as investment.

Americans are witnessing Government Failure on a massive scale, Government Failure from wrong monetary policy acts and wrong fiscal policy acts.

Markets are working perfectly, as they do always, adjusting to massive Government failure and most importantly, laying down the hard law of Economic Truth.

Janie December 22, 2008 at 4:46 PM  

And that same government will spend a cazillion of our tax dollars to reemploy those they lay off.

Econ News Video Blogger December 22, 2008 at 9:38 PM  

I think this is where the Keynesians run into problems. They tend to forget that government has to get its money from somewhere. Anyone who thinks we can spend out way out of this crisis thinks money grows on trees.

Dhaval Parikh December 23, 2008 at 4:10 AM  

People always hate to talk about when they are laid off. But as it has become every day's news headline since Yahoo started it with cutting 1500 of its task force last year, now a need of platform has been in demand where people can express their selves in words how they are feeling about their company, whey the got laid off was that justified or not.
And every thing they want to tell anonymously.And is providing you that platform.

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