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What layoffs?

September 1, 2005


Ron Wirtz Editor, fedgazette

Layoffs are a part of any market economy. But it's widely accepted as fact that involuntary job dislocations are on the rise, the unfortunate residual of a technology-driven, productivity-surging, outsource-crazed economy.

But here's a little vinegar for your coffee: Despite our fixation on plant closings and other layoffs, involuntary dislocations might not be rising quite like many of us believe.

The matter is a little difficult to pin down exactly because employment data have some inherent ambiguity. Data on mass layoffs (which involve 50 or more workers) have been collected by the Bureau of Labor Statistics only since April 1995, and they behave much like you'd expect: relatively stable levels of events and initial claimants through the latter half of the 1990s, spiking with the recession, and generally returning to prerecession levels. Other BLS data on employment changes due to firm closings and contractions (available since 1994) show similar findings; indeed, the rate of job loss from firm closings was actually lower during the recent recession than in late 1997 and early 1998.

The public's increased anxiety might stem from the confusion of involuntary job loss with gross job loss, which trended up during the 1990s through the middle of the recent recession. Gross job loss incorporates both involuntary and voluntary job separations; the latter includes the growing propensity among young workers to job-hop up a career ladder, as well as other "quits" like retirement. Media reporting on monthly job gains and losses tends to gloss over such distinctions.

Job security, however, has not eroded the way conventional wisdom suggests. Research published this year by Stanford University economist Robert Hall shows that job separations have remained relatively stable as a percentage of employment for the past 50 years. Research in 2002 by Jay Stewart of the BLS finds that job separation rates "changed very little" from the mid-1970s to 2001 and that job security overall saw a significant increase.

But job security has changed for different worker groups. Women, for example, have experienced gains over time as more women have taken positions requiring a college degree, which have lower job-loss rates. But for educated men and older workers, job security has declined, in part because these groups have previously been more insulated from job loss.

Ron Wirtz
Editor, fedgazette

Ron Wirtz is a Minneapolis Fed regional outreach director. Ron tracks current business conditions, with a focus on employment and wages, construction, real estate, consumer spending, and tourism. In this role, he networks with businesses in the Bank’s six-state region and gives frequent speeches on economic conditions. Follow him on Twitter @RonWirtz.