BLS Program, WARN Can Give Details of Layoffs
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A PUBLICATION OF THE TRENDS ARIZONA DEPARTMENT ECONOMIC OF ARIZONA ECONOMIC SECURITY Fall 2001 ness became synonymous with red ink, and instant millionaires began fil- BLS Program, ing for bankruptcy. The high-tech in- dustry was (and still is) hit the hardest, WARN Can with companies such as Motorola lay- PLANT ing off a quarter (nearly 40,000) of its Give Details employees within an 18-month period. ENTRANCE And mining businesses, suffering from of Layoffs CLOSING low copper prices, began abandoning AHEAD Arizona and other states for cheaper Note: In light of the large number of labor in South America and Third layoffs in Arizona (and nationally) World countries. during the past 18 months, portions of articles on federal legislation and a Then the events of September 11th data-collection program that report sent further shock waves through an mass layoffs are being reprinted with already shaky U.S. (and Arizona) econ- some updated information. The arti- end with a conflict in the Middle East. omy, with the transportation and tour- cles were part of a three-part series — At the time, problems in the finance ism industries receiving a shaking the published in the April, May, and June industry — brought on by change in equivalent of 8.0 on the Richter scale. 1992 issues of Arizona Economic the federal tax laws and loose lending Arizona has been particularly hard hit Trends — that focused on pro- policies and cuts in defense spending because it is home to America West grams/legislation designed to track at the end of the Cold War — trig- Airlines (which laid off 2,000 employ- and ease the effects of mass layoffs on gered a rash of mass layoffs. States ees immediately) and is heavily de- workers and their communities. such as California — with major de- pendent on the tourism industry. Resorts, suffering from low occupancy It was about a decade ago that a fense manufacturers and a large mili- rates to begin with, and related indus- long period or prosperity came to an tary presence — were decimated by military cuts, while in Arizona nary a tries (e.g., travel agencies) were forced savings & loan was left for the Reso- to cut employees. And state and local lution Trust Corp. to pick up the government, feeling the effects of pieces and sell off to more stable fi- lower revenues, has had to tighten its IN THIS ISSUE nancial concerns. belt in light of a $1.5 billion two-year state budget deficit. Fast forward to the spring of 2000. There are several options for assess- Volume 25 No. 3 Stock prices were at an all-time high and just a company’s association with ing the employment carnage nationally Page the Internet meant instant name rec- and locally for the last two years, but ognition and added value to its stock each has its limitations and, in some BLS Program, Early Notice Law price. After eight years of prosperity, cases, the data can be misleading. Can Give Insight into Layoffs .. 1 it looked like the Federal Reserve had One way would be to look at the WARN Still Has Its Detractors.... 3 found a way to manipulate the finan- change in nonfarm payroll employ- cial markets to bypass recessions. Brochure Highlights WARN Law 4 ment and labor force data. The U.S. Then … the bubble burst. First Department of Labor’s two major em- BLS Data Detail Mass Layoffs .... 9 stock prices began to fall, then compa- ployment surveys, the Current Em- Effects of 9/11 on Layoffs......... 13 nies seeing their business value shrink- ployment Statistics (CES) and Local Industry Update ....................... 15 ing, started liquidating assets, most Area Unemployment Statistics (LAUS) notably their workers. Internet busi- programs, track industry employment MASS LAYOFFS and overall employment and unem- Figure 1 ployment trends, respectively, on a Arizona Nonfarm Payroll Employment and Mass Layoff Totals, October 1999- monthly basis. September 2001 But looking at state’s raw employ- ment data the past two years, how- ever, would not portray the full Nonfarm Employment (in Thousands) Mass Layoffs (Actual) 2,350 5,000 extent of the loss of jobs in Arizona. CES’ nonfarm payroll data only con- vey the net change between job gains 2,300 4,000 and losses. For example, from Sep- tember 1999 through September 2001, Arizona’s nonfarm payroll employ- 2,250 3,000 ment rose by 82,000 — from 2.182 million to 2.264 million (see Figure 1). But that 82,000 gain, for example, 2,200 2,000 could come from many combinations of gains and losses: 102,000 gain and 2,150 1,000 20,000 loss; 122,000 gain and 40,000 loss; 162,000 gain and 80,000 loss. 2,100 0 Somewhat similarly, employment OND J FMAMJ J ASO NDJ F MAMJ J AS and unemployment data generated by 19992000 2001 the LAUS program (from the national monthly Current Population Survey) is Nonfarm Employment subject to a number of variables that Mass Layoffs won’t necessarily reflect recent mass layoffs. First, the survey for Arizona is based on a random sample of about Source: Arizona Department of Economic Security, Research Administration, November 2001 700 people — rotated in and out on a four-month basis — that may or may while DES, Research Administration’s Another problem with media re- not be affected by mass layoffs. Sec- biweekly Industry Update (available ports is that while the job-cut number ondly, LAUS data are seasonally ad- on the Internet) compiles reports on may be accurate, the type of layoffs do justed, which makes them less sus- expected layoffs and hirings. These matter. According to a New York ceptible to one or two independent type of publications, though, are only Times article, many job-cut announce- layoff events. Third, people are mov- as good as their sources. In the case ments indicate permanent layoffs, ing in and out of the workforce all of of Industry Update, primarily Arizona when in reality most of the job losses the time for various reasons — such as newspapers are the source of infor- may come from attrition and retire- in the summer when a rush of stu- mation. ment. “Such cuts do affect the econ- dents looking for work tends to raise omy, because the jobs no longer exist But even if the data are accurate, of- for other people to fill. Yet attrition the number of unemployed, or the in ten the information can be mislead- fall when teachers return to work and does not cause nearly as much eco- ing. First, many times layoff an- nomic pain as do permanent layoffs, decrease the number of unemployed nouncements might appear much — which can offset several major lay- which can severely disrupt families worse than they are. For example, and usually lower the incomes of af- off events. According to a Lehman when Whirlpool announced in De- Bros.’ study,“ … over the last seven fected workers for several years,” the cember 2000 it would cut 6,000 jobs, Times article said.3 years there has been little apparent re- or 10 percent of its workforce, the lationship between the number of an- “6,000” number made it into the That’s where one BLS program and nounced layoffs across corporate headlines across the country and into a piece of federal legislation that track 1 America and the unemployment rate.” Challenger’s layoff total for December mass layoffs can come in handy. Another possible way of determin- 2000, which set a record at the time.2 One of the best sources of data co- ing employment losses would be to However, when details of the Whirl- mes from U.S. Department of Labor’s track numbers released through me- pool layoffs were made known later, Mass Layoff Statistics (MLS) program, dia outlets. Nationally, Challenger, it turns out a majority of the cuts oc- a federal/state cooperative program Gray and Christmas has compiled a curred overseas, which have little or which was created in the early 1980s list of corporate layoffs since 1993, no effect on the U.S. economy. (continued on back page) 2 Arizona Economic Trends MASS LAYOFFS Industry Changes Led Jury Still Out to WARN What provoked Congress to pass an on Effectiveness early notification law — which was already required in most European of Early Closing Law PLANT countries and parts of Canada — was Note: Portions of this article were primarily due to two reasons: rapid originally published in the May 1992 ENTRANCE structural changes in the nation’s in- issue of Arizona Economic Trends. CLOSING dustrial base during the late 1970s Since that time, the Workforce Adjust- AHEAD and early ’80s, which caused wide- ment and Retraining Notification spread layoffs and plant closings; and (WARN) legislation has not changed, a large percentage of U.S. workers af- but some updated information on the fected by those changes who were re- law’s effects was added to this article. ceiving little or no advance warning before losing their jobs. It’s 2 p.m. on a Friday afternoon and XYZ Company has just notified Although an early notification law employees that it plans to go out of ages, while others gave little or no had been introduced in Congress as business as of 5 p.m. today. Rumors leave benefits. early as 1973, the idea didn’t gain had been flying for weeks that XYZ But with passage of the Worker Ad- momentum until the mid-’80s when, was planning to lay off workers or justment and Retraining Notification despite better economic times, a large cease operations, but no official word Act (WARN) in August 1988, more displacement of workers was still oc- has come down from management.