Companies Starting to Hire Back after Mass Layoffs
Life + Money

Companies Starting to Hire Back after Mass Layoffs

The mass layoffs of 2009 hit all sectors of the workforce hard and the troubling images of plant closings and chained doors of local warehouses and shops became deeply symbolic of a wretched U.S. economy. There were 11,827 mass layoffs at companies across the United States in 2009 that left about 2.1 million American workers jobless  – the most such “events” registered in one year since annual data became available in 1996.

But new data compiled by the Bureau of Labor Statistics (BLS) for The Fiscal Times shows more promising times ahead, with many of those same employers expecting to recall workers. BLS keeps tabs on companies’ recall expectations, and the data shows that 47 percent of companies that had mass layoffs – lasting at least 31 days and involving the filing of initial unemployment insurance claims by 50 or more people – expected to recall some workers during the third quarter of 2010, the highest expectation of recall reported over the third quarter in the last eight years.

Mass layoffs are “important to specific industries and it’s certainly something we think is important to look at and this is very encouraging news,” said U.S. Department of Labor Chief Economist Betsey Stevenson, “but it matches a broader picture of job recovery we’re seeing.”

Though workers involved in a mass layoff are a small portion of the nation’s overall unemployed, these events invariably draw considerable media attention and  have helped to shape much of the American public’s perception of just how badly depressed the economy had become. And while most American workers will never be fired as part of a mass layoff, they likely work in an industry that is threatened by them: from the palpable downsizing by the Big Three automakers  to specialty trade contractors and construction workers, to general merchandise store employees and merchant wholesalers, to telecommunication specialists, journalists, doctors and pilots. All of these industries, and more, reported mass layoffs in 2009.

“If you had a job in 2010, you were pretty safe. It’s still hard to
climb out of the ranks of the unemployed, but it’s getting better …”

But that’s where the bad news ends and the good news begins. According to the BLS data, every private nonfarm industry, other than the real estate, reported higher recall expectations than in the third quarter of 2009. Manufacturing companies reported one of the largest rehiring expectation increases – from 25.7 percent to 40.6 percent. That is promising news for states like Michigan and Texas, which have larger manufacturing bases. Downsizing activity also fell to its lowest level since 1997, as employers announced plans to eliminate 529,973 jobs in 2010, 59 percent fewer job cuts than in 2009, according to a report by Challenger, Gray & Christmas, Inc. 

“Companies weren’t just cutting people left and right like they did do in 2009,” said John A. Challenger, CEO of Challenger, Gray & Christmas, Inc. “If you had a job in 2010, you were pretty safe. It’s still hard to climb out of the ranks of the unemployed, but it’s getting better now as demand is starting to return. Businesses seem to be doing better and there’s more optimism amongst business owners.”

The list of companies that reported double-digit rehiring expectations in the third quarter of 2010 include those in: professional and technical services, management of companies and enterprises, administrative and waste services, and educational services. Whether this rehiring will materialize cannot be predicted with any certainty, and remains a topic of debate among economists. However, many economists agree that the encouraging data on mass layoff recall expectations is emblematic of a nation in economic recovery, and thus will materialize.

“We are now in part of the recovery mode where
businesses have to increase labor in proportion to their output.”

“We are now in part of the recovery mode where businesses have to increase their labor inputs in proportion with how much they want to increase their output,” said Dana Johnson, chief economist for Comerica Bank. “To me it all fits together with other things I’ve been thinking about that argues that we’re going to have a considerably stronger increase in hiring in 2011 compared to 2010.

“There’s been a healing process that is not complete but that nevertheless has created a firmer foundation for growth now then we had a year ago,” Johnson added. “So I think the economy is going to continue to brighten and I think a lot of these intentions and expectations of recall are actually likely to materialize.”

Even as the bottom of the housing market continues to drop, the pattern of Gross Domestic Product growth from quarter to quarter steadily rose in 2010. The Bureau of Economic Analysis reported the economy grew 2.7 percent in the first quarter, 1.7 percent in the second quarter, and 2.5 percent in the third quarter. Numbers for the fourth quarter are due out Friday. 

 “We added more than 1.3 million private sector jobs in 2010 and beyond that what we saw is in every quarter of 2010 the job growth increased over the previous quarter,” added Stevenson.  “And that shows we’re not just seeing job growth but we’re seeing improving job growth and Q4 was the best quarter we’ve seen so far, and I think all of that points to us being in the right direction and in fact I would be surprised if we didn’t see recalls of mass layoffs going in the same direction as other hiring.”
BLS and The Fiscal Times specifically used numbers from the third quarter over the last eight years to help account evenly for any changes in seasonality.

In its survey, BLS asks companies to what degree there will be a recall of workers and if so what percentage will return to work. Though companies are free to hire new employees it’s more cost effective to hire workers who have already been trained.

Related Links:
Hospital Mass Layoffs Slow Down at End of 2010 (American Medical News)
Bill to Require Advance Notice of Mass Layoffs Advances (NJ Today)
Religious Leaders Call for Reprieve from Mass Layoffs (Cherry Hill Courier Post)