US Job Creation Still Outpacing Pink Slips.

Layoff announcements grew six times as fast as persons actually laid-off over the last nine months, according to an analysis released by the Employment Policy Foundation.

While the monthly rate of announced employee layoffs increased 113 percent between the first half of 2000 and the second half of 2000 plus the first quarter of 2001, the number of employees actually unemployed by mass layoffs increased only 24 percent and actual job losses increased only 9 percent. Mass layoffs still account for less than 20 percent of all US unemployment, a number that has not changed in the past five years, EPF’s analysis of Bureau of Labor Statistics data found.

“Announcements of mass layoffs result in far fewer job losses than the numbers foretell because many of the announced cuts never come to fruition, are scheduled to occur over a long period of time, affect employees outside the US, or are only temporary,” said Ron Bird, EPF’s chief economist. “In addition, they exaggerate the overall state of the economy because there are fewer offsetting announcements of expansion plans.”

Job creation has outpaced job elimination every February since 1995 and February 2001 has repeated this pattern — 1.7 million jobs were created compared to 1.4 million that were eliminated. Job creation in February 2001 is comparable to February 2000 – a time when the economy was considered to be at its apex – and is 15 percent higher than it was in February 1999.

“The fact that more jobs are being created than lost corresponds with the fact that national unemployment remains at a low 4.3 percent,” said Bird. “This March figure, up just one-tenth of a percent, is cause for concern but not panic — most observers had expected the rate to be higher, based on reports of mounting layoff announcements. The slight rise in unemployment translates into approximately 150,000 more people unemployed — for a total of 6.1 million. Apparently, layoff announcements are not showing up fully in realized unemployment.”

Reports of layoffs have increased significantly over the past decade, mainly due to legislation passed by Congress in 1988 (the Worker Adjustment and Retraining Notification Act, or WARN Act) that encourages employers to issue public statements about layoff plans, even if the plan is tentative or will be spread out over many months. However, while companies may be downsizing one part of their company, they are often hiring in other areas and many of the employees affected by the cut transfer to jobs within the same company without becoming unemployed. As a result, since 1995, the net average change in employment for firms reporting layoff is close to zero.

“The real story of the economy is not mass layoff announcements – it’s that new jobs are not being created at the speed they once were,” he added. “Blaring headlines about reports that track mass layoffs fail to take into account the fact that mass layoffs are just one piece of the economic puzzle – and a small one at that. Layoffs are still serious, but not a cause for hysteria when viewed from the perspective of the continuing strength of the U.S. economy,” Bird concluded.

To view a copy of the analysis CLICK below (Adobe Acrobat required):

http://www.epf.org/research/newsletters/2001/ff20010409.pdf