Thursday, May 14, 2009

Brace for new layoffs

The job loss has tentatively seen a cyclical low when 741,000 jobs were cut in January 2009. This certainly doesn't mean that employers will start adding jobs, however, there are some reasons to believe that the rate of job loss will slow going forward.
  1. As of 5/13/09, the 4-week moving average of initial claims fell four consecutive weeks. But don't get excited, the level of claims rests at the 600k-level.
  2. My favorite measure of mass layoffs - which are bulk layoffs of 50 or more persons at one event - the Forbes layoff tracker (announced layoffs at 500 biggest US firms) has decreased of late.
In spite of points 1. and 2., the labor market is just awful; and really not showing any marked improvements. Already households are stressed, and the unemployment rate, 8.9% in April, is set to rise further.

However, the labor market is going to get a jolt downward, as GM and Chrysler announce the closure of > 2,600 dealerships. And although the GM and Chrysler plant closures are small compared to the hemorrhaging of jobs across all other sectors, it sure throws water on the flame of hope. From the LA Times:
With struggling automakers expected to announce the shutdown of thousands of dealerships starting today, cities are bracing for a wave of blight.

The closings will dump thousands of large, oddly configured parcels into an already reeling commercial real estate market. Many are likely to remain empty for a long time, monuments to the decline of the U.S. auto industry and the intensity of this recession.

Chrysler is expected to tell a Bankruptcy Court today that it will break its contracts with as many as 800 dealerships nationwide. General Motors Corp. will tell 1,000 to 1,200 dealers Friday that it will not renew their franchises. The automaker plans to eventually close a total of 2,600 operations.

In California, the moves will have far-reaching implications for dozens of cities, which depend on sales tax revenue from the dealerships to fund substantial portions of their budgets.
Mass layoffs were already setting records (see chart to the left, click to enlarge). The number of mass layoff claims (claims associated with firings of 50 workers or more) adjusted for the size of the payroll hit a new record in March.

This recession is now in its 17th month, but the labor market contraction will continue well after the economy has stabilized.

Rebecca Wilder

1 comment:

  1. There is a potential (new) auto mall west of here that has only one tenant. The others bailed. Poof! The trickle down on suppliers is going to be mammoth and very little is said about that.

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