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OT Layoffs aren't the main problem
May 15, 2009, 11:38 AM
Layoffs Aren’t the Main Problem
By DAVID LEONHARDT
What makes the Great Recession different from all other recent recessions is not mainly the number of workers being laid off. It’s how few workers are being hired.

Look at this chart, from the Labor Department’s latest report on labor turnover (which Catherine Rampell also wrote about recently):

It makes the current recession look qualitatively different from the 2001 recession, right?

The line in the chart is showing the rate at which employers hire new workers. (To be more precise, it is the total number of workers hired in a given month, divided by total nationwide employment.) Hiring has essentially fallen off a cliff over the last year and a half. It’s far lower than it was during the 2001 recession.

Now consider this chart, which shows the rate at which companies lay off workers:
Layoffs have clearly soared in the last six months. And the layoff rate has been high for longer in this recession than it was in 2001. But it has not hit a new peak. It’s merely tied its old peak. The layoff rate was roughly the same in March 2009 as it was in March 2001. (Unfortunately, these numbers exist back to just 2000, but another survey suggests the peak layoff rate in the 1990-91 recession was at least as high as the current rate.)

You don’t see these numbers on hires and layoffs very often. The much better known statistic is the net number of jobs added or lost, which comes from the Labor Department’s monthly employment report. The most recent report showed that 539,000 jobs had been lost in April. This net number is the difference between the hiring and layoff numbers, along with a couple of other categories, like the number of workers who quit their jobs.

Imagine, for example, a company that has 100 workers at the start of the month. If it lays off 6 of those workers and hires 5 new workers, the monthly employment report will show a net loss of 1 job. But the turnover survey will show the details behind that net loss: 6 layoffs and 5 hires.

When people talk about the enormous job losses of the last year, they tend to assume that job cuts are the main reason. But these turnover numbers tell a clear story: layoffs aren’t the main problem. A lack of hiring is.

Why? How should the government respond? How should the country’s long-term economic policies be changed to reverse this long-term decline in hiring? All are good, hard questions.

It’s hard to see how we’ll find the right solutions if we are misdiagnosing the problem.

http://economix.blogs.nytimes.com/2009/05/15/layoffs-arent-the-main-problem/?hp