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Mass Layoffs Spike in 2008

POSTED: January 30, 2009, 12:00 am

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This week a number of major U.S. companies have announced layoffs, from Starbucks to Home Depot, with the home building and repair retailer also announcing that it will close its upscale Expo Design Centers. In the course of this week alone, over 100,000 layoffs have been announced. The effect of these mass layoffs is felt in the rush of laid off workers filing initial unemployment claims. Now new data from the Bureau of Labor Statistics (BLS) details the extent to which mass layoffs impacted the economy in 2008.

As the official unemployment rate climbed during the last quarter of 2008 and the numbers of Americans out of work increased, those figures were impacted by an increase in the number of mass layoff events last year. These are layoffs by a single employer affecting at least 50 persons. In December employers took 2, 275 mass layoff actions according to the BLS. That number feeds into the 7.2 percent unemployment rate for last month as well as the loss of 524,000 jobs in December.

From the start of the recession in December 2007 through December 2008, there were 23,485 mass layoff events (seasonally adjusted) with initial unemployment claims (seasonally adjusted) at 2,394,434. On a not seasonally adjusted basis, the total numbers of mass layoff events were 21,137 and initial claims at 2,130,220 for all of 2008, the highest annual levels since 2001 and 2002.

The number of mass layoffs was spread across industries last month. Twelve industries reported highs in terms of initial claimants for the month of December – mining, construction, manufacturing, wholesale trade, transportation and warehousing, finance and insurance, real estate and rental leasing, management of companies and enterprises, administrative and waste services, educational services, accommodation and food services, and other services, except public administration.

The manufacturing sector accounted for 41 percent of all mass layoff events and 49 percent of initial unemployment claims. One year ago the sector made up 32 percent of mass layoff events and 41 percent of initial claims. Last month, within the manufacturing sector, the greatest number of claims was in transportation equipment, plastics and rubber, and fabricated metal products. The construction industry accounted for 16 percent of mass layoff events and 12 percent of initial claims in December. Overall last month the industry with the largest number of initial claims was temporary help services (15,246), next came school and employee bus transportation (13,999) and highway, street and bridge construction (13,035).

There were varying degrees of impact from mass layoffs on different parts of the country. In December the Midwest recorded the highest number of initial claims (146,155) followed by the South (94,307), the West (65,942) and the Northeast (44,901). Initial unemployment claims associated with mass layoffs increased over the year in all four regions, with the Midwest and South recording the largest increases. California led all states with the highest number of initial unemployment claims filed due to mass layoffs, followed by Ohio, Illinois and Michigan.

For all of 2008 the ten industries with the highest number of initial unemployment claims accounted or 26 percent of the total for the year. The three industries that recorded the largest numbers were temporary help services, school and employee bus transportation, and food service contractors. Also in 2008, light truck and utility vehicle manufacturers entered the top ten industries in terms of initial claims, displacing department stores from the top ten list and a sign of the degree to which sales of these vehicles have dropped.

With no sign of a potential slowdown in these mass layoffs, President Obama is under tremendous pressure as the layoff announcements made during this week illustrate. One of the major challenges facing the Obama administration is how to inject aid into the economy quick enough to stem the type of job actions these numbers from last year represent. As companies shed their workforces due to declining revenue and rising costs, the unemployment compensation system is being overrun as the rolls of the jobless increase. Making matters even worse is the fact that for most workers who are laid off the duration of their time without a job has increased; one of the reasons Democrats on the Hill have made an extension of unemployment benefits part of the economic recovery package.

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