Magazine article Economic Trends

Extended Mass Layoffs

Magazine article Economic Trends

Extended Mass Layoffs

Article excerpt

02.23.07

When 50 or more new claims for unemployment benefits are received from one establishment in a given month, government statisticians call it a mass layoff. If the layoff lasts more than 31 days, it is designated an extended mass layoff. There were 1,444 such layoffs in the fourth quarter of 2006, according to preliminary estimates from the Department of Labor's Bureau of Labor Statistics, and they caused the separation of 255,886 workers from their jobs. These numbers indicate a slight increase over the fourth quarter of 2005. Among those employers who reported extended layoffs, 57 percent indicated that they were expecting to recall some of the workers. This was the lowest proportion for any fourth quarter since 2002.

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The distribution of extended layoffs by the size of the layoff shows an interesting picture, too. A mere 1.8 percent of the layoffs caused almost 20 percent of the separations that occurred in the fourth quarter of 2006; such layoffs were of course large, each involving more than 1000 separations. On the other hand, many more mass layoffs (42.5 percent) involved fewer workers (50-99); however, these smaller mass layoffs accounted for only 16.8 percent of the total number of worker separations occurring during the quarter.

Extended mass layoffs constitute a major source of job separations, especially during recessions, when the need for major employment adjustment is widespread. For instance, both extended mass layoffs and resulting separations peaked in 2001, in the midst of the most recent recession.

However, extended layoffs are not an atypical feature of a healthy economy. The completion of seasonal work caused 42 percent of the extended layoffs in the fourth quarter of 2006, generating 45 percent of separations. Contract completion follows seasonal work as a major reason for extended mass layoffs. These two factors, on average, have accounted for 44 percent of extended mass layoffs and 43 percent of separations annually since 2000. Deviations from this pattern do occur, as in 2001, when poor economic conditions forced businesses to initiate mass layoffs, and the fraction of extended mass layoffs accounted for by the completion of seasonal work and contracts declined to 27 percent. …

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