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Friday, February 23, 2007

Manufacturing Employment and Extended Mass Layoffs

Here are two Economic Trends articles from the Cleveland Fed. The first looks at parallels between declines in manufacturing and agricultural employment, and the second characterizes extended mass layoffs since 2000:

Is Manufacturing Going the Way of Agriculture?, by Ed Nosal and Michael Shenk, Economic Trends, Cleveland Fed: On average, employment increased by 186,917 workers each month in 2006. The vast majority of this employment growth came from the service sector; manufacturing registered a small monthly decline, while the remainder of the goods-producing sector experienced a small increase. The total employment numbers for 2006 seem to dwarf the average monthly job growth seen since the start of this century. The average numbers for the 2000-2006 period are “small” owing to the March 2001-November 2001 recession and the so-called jobless recovery which followed, where employment growth actually remained negative for nine of the first ten months after the recession's official end. Since the beginning of 2000, the loss in manufacturing jobs has been significant, averaging 37,524 per month.

The sluggish growth in manufacturing employment, however, is not a recent phenomenon.  The level of employment in manufacturing today is about the same as it was in 1947, while the U.S. population has more than doubled over the same period. Employment in manufacturing did experience growth during the 1960s; after that, employment growth was essentially zero until 2000, after which it became negative.

Because the population and, hence, the labor force has grown, the share of manufacturing employment (to total employment) has been steadily falling since the Korean War. Approximately one in every three workers was employed in manufacturing after the Second World War; today, that number is about one in ten. Although the share of manufacturing employment has steadily fallen over time, the share of manufacturing output (to total output) has been remarkably stable over the same period. Labor productivity growth in manufacturing over this period can explain the falling employment share and the constant output share.

Changes in manufacturing employment during that last half of the twentieth century are remarkably similar to those in agriculture during the first half of the twentieth century. About a third of U.S. workers were employed in agriculture at the beginning of the century, but by 1950 that number was only a tenth. As with manufacturing, agriculture's share of employment consistently fell from 1947 into the 1980s, at which point it leveled off, but its share of output remained relatively constant. 

Here's the second article:

Extended Mass Layoffs, by Murat Tasci and Cara Stepanczuk, Economic Trends, Cleveland Fed: 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.

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.

Layoff Activity by Size of Layoff
(October-December 2006)

Size of layoff Layoffs Separations
  Number Percent Number Percent
50-99 614 42.5 43,022 16.8
100-149 340 23.5 39,961 15.6
150-199 158 10.9 26,022 10.2
200-299 193 13.4 44,162 17.3
300-499 80 5.5 28,872 11.3
500-999 33 2.3 22,826 8.9
1000 or more 26 1.8 51,021     19.9
Total 1444 100 255,886 100
*Data for the third and fourth quarters of 2006 are preliminary.
Source: Department of Labor, Bureau of Labor Statistics.

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.

The geographical distribution of extended mass layoffs shows that nearly a third of them (31.8 percent) have occurred in the Midwest since 2000, causing 31.6 percent of the separations that have resulted from such events. The Midwest separations were also responsible for 32 percent of all the U.S. unemployment claims that have been initiated on account of extended mass layoffs. (Initiating a claim has a very specific meaning at the Bureau of Labor Statistics: A person who files any notice of unemployment to initiate a request either for a determination of entitlement to and eligibility for compensation, or for a subsequent period of unemployment within a benefit year or period of eligibility is defined as Initial claimant.)

Regional Shares of Extended Mass Layoffs
  Annual average 2000-2006 (percent)
  Total layoffs Separations Initial claims
Northeast
19.8
18.0
21.1
South
24.3
23.1
23.6
Midwest
31.8
31.6
32.0
West
24.1
27.2
23.3
*Data for third and fourth quarters of 2006 are preliminary.
Source: Department of Labor, Bureau of Labor Statistics.

    Posted by on Friday, February 23, 2007 at 10:53 PM in Economics, Unemployment | Permalink  TrackBack (0)  Comments (41)

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