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. commonly known by its acronym, the curring. According to a General Ac- playing field between medium- and counting Office (GAO) report, even Most of the company’s 500 employ- in the strong economic years of 1983 ees, many with 20 or more years of large-size businesses and their work- ers — as it related to layoffs — be- and 1984 — when U.S. employment service, had not prepared — job- increased about 5 percent — more search wise or emotionally — for the came a little more level. With a few exceptions, companies with 100 or than 1 million workers lost their jobs possibility of losing their jobs, pri- due to business closure or permanent marily because they always had felt more full-time workers were now re- quired to give advance written notice mass layoffs in establishments with their employment was secure. XYZ, more than 100 workers, with another meanwhile, had known for several at least 60 days prior to a permanent plant closure or major layoff. million jobs likely lost in smaller es- months that it would be shutting its tablishments.4 doors due to declining sales, but did WARN defines a “plant closing” as not want to end its operations before an employment loss of 50 or greater Making matters worse, between Jan- it had lined up a buyer for its build- at one or more distinct units within a uary 1979 and January 1984 one-fourth ings. Also, the company had feared single site within a 30-day period: A of all displaced workers were without that by giving advance notice of a “mass layoff” is defined as an employ- a job for a year or more. And of those plant shutdown, disgruntled employ- ment loss at a single site of 500 work- returning to work, the majority took a ees may not work as hard and that it ers, or 33 percent of the employees if cut in earnings, either through lower would cause stressful conditions be- wages or acceptance of part-time em- it involves at least 50 workers, within 5 tween workers and management a 30-day period (see “DOL Brochure ployment in place of a full-time job. during the final months of operation. Gives Details ...,” p. 4) Concerning advance notification, Prior to Feb. 4, 1989, the above “Workers, their families and their two major surveys were conducted by scenario — or something close to it communities will now have a better federal agencies in the mid-’80s — would not have been unusual at chance to plan for the future,” said showing a lack of warning time for a many medium-size and large U.S. AFL-CIO President Lane Kirkland after good percentage of laid-off workers, companies. Except in two states and WARN was passed.2 The director of although one study painted a much where labor and management had legislative affairs and human re- worse picture. prearranged agreements, U.S. busi- sources at the National Association of A 1985 survey by the Labor Depart- nesses had the right to let go work- Manufacturers, however, warned that ment’s Bureau of Labor Statistics ers with no advance warning,1 the new legislation would hurt me- (BLS) showed that in layoffs involving although company policies varied dium-size businesses, who he said of- 50 or more workers in seven states it across the board: some employers ten cannot predict what they plan to studied, in more than one-half of the offering generous severance pack- do two months in advance.3 events — affecting two-thirds of the

Fall 2001 3 MASS LAYOFFS

workers — no advance notice was site) will be shut down, and the 6 given. Meanwhile, a GAO study of DOL Brochure shutdown will result in an employ- companies with 100 or more employ- Gives Details ment loss (as defined later) for 50 or ees, showed that 24 percent gave no more employees during any 30-day advanced notice to workers involved of WARN Law period. This does not count employ- in layoffs of 100 or more workers ees who have worked less than six 7 The following material on the during 1983 and ’84. The large dif- months in the last 12 months or em- Worker Adjustment and Retraining ferences in the two studies’ findings ployees who work an average of Notification Act (WARN) is reprinted could have been due to the fact that less than 20 hours a week for that in part from a brochure titled, “A the GAO specifically surveyed larger employer. These latter groups, how- Guide to Advance Notice of Closings companies, who do tend to give ever, are entitled to notice. more advanced notice of plant and Layoffs,” produced by the US. closings and layoffs. Department of Labor’s Employment Mass Layoff: A covered employer and Training Administration. must give notice if there is to be a The two surveys’ findings, neverthe- General Provisions mass layoff which does not result less, gave support to a variety of in- from a plant closing, but which will terest groups (e.g., organized labor, The Worker Adjustment and Re- result in an employment loss at the mayors of affected cities) who were training Notification Act, Public Law employment site during any 30-day lobbying Congress to enact legislation 100-379 (29 U.S.C. 2101, et seq.) of- period for 500 or more employees, that would give workers and local fers protections to workers, their or for 50-499 employees if they communities some lead time to find families, and communities by requir- make up at least 33 percent of the new work or attract new business. ing employers to provide notice 60 employer’s active workforce. Again, And in 1985 and ’87, Congress intro- days in advance of covered plant this does not count employees who duced legislation that attempted to closings and covered mass layoffs. have worked less than six months in not only offer advance notification of Employer Coverage the last 12 months or employees plant closings and layoffs, but also who work an average of less than 20 force companies to use procedures In general, employers are covered hours a week for that employer. for avoiding job losses. by WARN if they have 100 or more These latter groups, however, are Those bills, however, failed to gain employees, not counting employees entitled to notice. enough support to pass both houses, who have worked less than six let alone an expected veto from then months in the last 12 months and not Exemptions President Reagan, who opposed laws counting employees who work an An employer does not need to give he believed overregulated business. average of less than 20 hours a week. notice if a plant closing is the closing Some of the provisions found objec- Private, for-profit employers and pri- of a temporary facility, or if the clos- tionable in the ’85 and ’87 legislation vate, nonprofit employers are cov- ing or mass layoff is the result of the were: advance-warning periods rang- ered, as are public and quasi-public completion of a particular project or ing from 90 to 180 days, considered entities which operate in a commer- undertaking. This exemption applies too long because it would limit busi- cial context and are separately orga- only if the workers were hired with ness flexibility; bureaucratic oversight nized from the regular government. the understanding that their employ- and enforcement — with its attending Regular federal, state, and local gov- ment was limited to the duration of costs — of advanced-warning provi- ernment entities which provide pub- the facility, project or undertaking. sions; and consultation and sharing of lic services are not covered. An employer cannot label an ongo- information between employer and Employee Coverage ing project “temporary” in order to employee to identify ways to avoid a evade its obligations under WARN. layoff or closing, considered too in- Employees entitled to notice under An employer does not need to pro- trusive by business.8 WARN include hourly and salaried workers, as well as managerial and vide notice to strikers or to workers In 1988, however, a showdown supervisory employees. Business who are part of the bargaining unit(s) emerged between Congress and Rea- partners are not entitled to notice. which are involved in the labor nego- gan. Early in the year, the President tiations that led to a lockout when successfully vetoed trade legislation What Triggers Notice? the strike or lockout is equivalent to passed by Congress that contained Plant Closing: A covered employer a plant closing or mass layoff. Non- early notification provisions, even must give notice if an employment striking employees who experience though the advanced-warning provi- site (or one or more facilities or op- an employment loss as a direct sions were far less stringent than erating units within an employment (continued on page 5) those considered in ’85 and ’87. But

4 Arizona Economic Trends MASS LAYOFFS

Congress fought back by uncoupling the early notification section from the Details of WARN Law where a closing or layoff is the direct result of a natural disaster, such as a trade law and, with growing public (continued from page 4) support for an advanced-warning law, flood, earthquake, drought, or storm. or indirect result of a strike and was able to pass WARN in August Form and Contact of Notice with enough votes to override a po- workers who are not part of the bar- gaining unit(s) which are involved in tential veto. No particular form of notice is re- the labor negotiations that led to quired. However, all notices must Because of possible repercussions lockout are still entitled to notice. in a presidential election year, Reagan be in writing. Any reasonable meth- allowed the bill to become law with- Who Must Receive Notice? ods of delivery designed to ensure out his signature, but still voiced his receipt 60 days before a closing or The employer must give written opposition in a presidential statement. layoff is acceptable. notice to the chief elected office of “Workers should he given as much the exclusive representative(s) of Penalties notice as possible when a business is bargaining agent(s) of affected em- forced to resort to layoffs, or to close ployees and to unrepresented indi- An employer who violates the altogether... But the Federal govern- vidual workers who may reasonably WARN provision by ordering a plant ment’s mandating that businesses un- be expected to experience an em- closing or mass layoff without pro- der virtually all conditions must give ployment loss. Employees who viding appropriate notice is liable to 60-day’s notice — even if doing so have worked less than six months in each aggrieved employee for an eliminates any chance to save the the last 12 months and employees amount including back pay and ben- company — is not a proper course.”9 who work an average of less than 20 efits for the period of violation. The Although Reagan was unhappy with hours a week are due notice, even employer’s liability may be reduced WARN’s passage, he and those op- though they are not counted when by such items as wages paid by the posing advance notification may not determining the trigger levels. employer of the employee during have lost as much as his statement in- the period of violation and voluntary The employer must also provide dicated. Major concessions along the and unconditional payments made notice to the state Dislocated Worker way limited WARN’s power and pos- by the employer to the employee. Unit and to the chief elected official sibly its effectiveness (see below, “Ef- of the unit of local government in An employer who fails to provide fectiveness of WARN”). “The which the employment site is located. notice as required to a unit of local plant-closing legislation was weak- government is subject to a civil pen- ened considerably during the process Notification Period alty not to exceed $500 for each day and the measure in its present form With three exceptions, notice must of violation. This penalty may be allows exemptions that could reduce avoided if the employer satisfies the its impact on businesses, said a Wash- be timed to reach the required par- ties at least 60 days before a closing liability to each aggrieved employee ington Post article at the time of its within three weeks after the closing passage.10 or layoff. The exceptions to the 60-day notice are: or layoff is ordered by the employer. In addition, almost immediately af- Enforcement of WARN require- ter WARN passed, legislation was ap- Faltering company. This exception, ments is through the United States proved to help workers affected by to be narrowly construed, covers sit- district courts. Workers, representa- major layoffs — the Employment Dis- uations where a company has tives of employees, and units of lo- location Worker Assistance Act sought new capital or business in or- cal government may bring individual (EDWAA) — which likely made early der to stay open and where giving or class-action suits. notification more palatable to those notice would ruin the opportunity to opposing WARN. Because by help- get the new capital or business, and General questions on the regula- ing workers to re-enter the workplace applies only to plant closings. tions may be addressed to: more quickly, employers’ unemploy- Unforeseeable business circum- U.S. Department of Labor ment insurance costs would likely be stances. This exception applies to Employment and Training reduced. closings and layoffs that are caused Administration Reasons For, Against Early by business circumstances that were Office of Work-Based Learning Notice not reasonably foreseeable at the Room N-5426 time notice would otherwise have 200 Constitution Avenue, N.W. When advanced-notification laws been required. Washington, D.C. 20210 were being debated, those for and Natural disaster. This applies (202) 219-5577 against it agreed that advanced notifi-

Fall 2001 5 MASS LAYOFFS cation of major layoffs and plant firm intends to lay off workers closings was the “ideal situation,” but “Both elements of the or close gives signals to custom- the sides parted when it came to compliance mechanism ers and creditors that the firm is making advance notification manda- in trouble.”14 — court enforcement and tory. • productivity will decline be- Those pro and con put forth a num- legal sanctions — pose im- cause of a drain of top talent ber of reasons for their views, and plementation problems. needed for an orderly closure many of those reasons are provided or layoff, which will reduce in this section. But overall, the justifi- … By the time a court profits and worsen conditions cation for an advance-notice law acts, it is likely that the that led to the announcement. came down to an issue of fairness To keep top talent, companies (e.g., time to find another job), while closing or layoff has al- may need to pay bonuses, add- for those opposed to WARN, eco- ing costs. “The difference be- nomic costs — from administering ready happened ... .” tween employees’ current and WARN to penalties — were the major — John Portz expected compensation and al- themes. ternatives available in the mar- Some of the reasons given for ad- Professor, ket will be narrowed, causing vance notification were: Northeastern University some workers to leave the firm before expiration of the notifi- • that it gives companies, labor cation period,” said the Nathan and government agencies time nizes that the layoff and job Associates study.15 to plan and develop adjust- transition process is a difficult ment-assistance programs. one and the employer is there- GAO Study of WARN Law fore attempting to buffer the im- • when it’s used in conjunction Because WARN had only been in ef- pact,” said Ruth Fedrau, an with programs such as EDWAA, fect a little more than three years expert in job placement. 12 it can reduce employers’ costs when this article was first published, by getting laid-off workers into On the other hand, arguments, little data had been compiled on the the workforce more quickly and against mandating advance notification effectiveness of the law (e.g., are com- reducing employers’ unemploy- included: panies complying with its provisions?), ment insurance costs. • it inhibits companies’ flexibility as well as if it had produced any ad- • related to the just-mentioned in a more competitive, world- verse effects on business. However, reason, displaced workers are wide operating market, by com- results from one study and comments more likely to participate in mitting employers to make a by several state and federal officials job-assistance projects that be- long-term prediction of business appeared to suggest that WARN was gin before a job loss. “... it is conditions. providing only limited protection for difficult even to let workers • it is too costly, particularly to workers and had caused a large know that help is available after medium-size businesses. Costs amount of confusion in several areas they are out of work and out of incurred by employers include for all parties involved — business, touch,” said a GAO report.11 the administrative costs of de- workers, and government agencies. • whether or not they take advan- veloping and executing an ap- Subsequently, a study by the GAO, tage of adjustment services, it paratus to monitor and forecast which came out in 1993, was critical of helps benefit people, by giving market conditions, as well as the law’s effectiveness and suggested workers a chance to develop the administrative costs to pro- the Department of Labor take a role in their own job-hunting or train- vide notice, and costs of penal- its implementation (see Table 1). And ing options, or to adjust finan- ties. In a 1988 report by Robert more recent anecdotal information cial or other family plans. R. Nathan Associates, it was es- (e.g., media reports) by parties af- • it helps maintain the morale and timated that if the WARN law fected by the law would imply that loyalty of remaining workers and had been in effect in 1983 and WARN still has many detractors. reputation of a company, by ’84, it would have cost busi- In a 1992 report by a Northeastern showing the company treats its nesses $1.8 billion each year.13 University political scientist, state offi- employees fairly. “ … workers • advance notice “could worsen cials said “loopholes” in WARN, inade- are less likely to respond in a the conditions that led to the quate enforcement provisions, and its punitive manner when they per- notice and make a firm’s de- overall vagueness have made it easy ceive that their employer recog- cline inevitable. … notice that a for employers to avoid compliance

6 Arizona Economic Trends MASS LAYOFFS

with the law or unsure or unaware Table 1 they need to comply, thus limiting Major Findings of General Accounting Office Report on WARN WARN’s effectiveness. The results of the report, “WARN and the States: Im- √ Many Layoffs Excluded from Notice Requirement — More than half of the employers in an plementation of the Federal Plant 11-state analysis with 100 or more workers that had a layoff affecting 50 or more workers Closing Law,” were based on com- were not required to provide notice. The major reason for excluding these layoffs was the ments and data received from 35 state agencies that handle WARN notices. requirement that the layoff affect one-third of the workforce or 500 or more workers. Of particular concern to state √ Many Employers Failed to File WARN Notices — Even when closures appeared to meet the agency officials were the number and vagueness of “exceptions” allowed WARN criteria, employers did not provide advance notice for half the events analyzed. under WARN. “ … ‘loopholes in the When advance notice was provided, 20 percent did not give workers the required 60 law provides avenues of escape for days’ notice. many employers anticipating lay- offs/closures,’ ” one official was √ Employers Cited Benefits, Negative Affects of WARN — Of employers surveyed who gave 16 quoted in the report. The net effect advance notice, 47 percent believed their workers found new jobs sooner as a result of get- of creating broad exemptions, said ting advance notice and 61 percent reported costs of less than $500; 29 percent reported the study’s author, John Portz, was to productivity declines after giving notices to their workers. make compliance with WARN more difficult to monitor. √ Need to Improve Enforcement of WARN — Lawsuits are the only enforcement tool available One “exception” considered particu- to workers or local communities under WARN. However, despite the possible violations of larly troublesome by state officials — WARN, few lawsuits were filed during the first three years of WARN. The costs associated allows employers to give less than with a lawsuit, the limited incentives, and the uncertainty about the outcomes make using the 60-days notice for a layoff or plant closing when there are “unforesee- courts as an enforcement mechanism difficult. Congress should consider giving responsibil- able business circumstances,” which ity and authority for enforcing WARN to the Department of Labor. could cover a broad range of reasons and be subject to broad interpreta- tion. Another exception considered Source: “Dislocated Workers: Implementation of the Worker Adjustment and Retraining Notifi- too vague, which has caused some cation Act (WARN),” General Accounting Office, February 1993. confusion in Arizona, exempts com- panies from providing notice “if the government. cases (none in Arizona) had been plant closing involves a temporary fa- filed on WARN in federal courts, with In order to determine if a company cility, or if the closing or mass layoff less than half resulting in a court de- needs to file a notice, court action is the result of the completion of a cision, the study said. About a must be taken by either a company’s particular project or undertaking.” half-dozen each went in favor of the union, its workers, or units of local plaintiffs (e.g., workers) and defen- In 1992, the secretary/treasurer of the government where the company is lo- dants (e.g., businesses) with several state’s AFL-CIO, Chuck Huggins, said cated. But the problem with this type others out on appeal. that one employer in the state was of enforcement, Portz said, is the able to avoid issuing WARN notices “vacuum” that occurs while the court More recently, a “majority of court for the latter exception because the makes its decision. word “temporary” is subject to several cases are settled (out of court),” said interpretations. Huggins said that pro- “The compliance mechanism is seen Mark Fancher, a WARN expert and jects that technically may be “tempo- by the states as one of the weakest senior staff attorney for the National rary” are in fact “permanent” as long links in the implementation process,” Lawyers Guild/Maurice and Jane as funding for the project continues for Portz said. 17 “Both elements of the Sugar Law Center for Economic and an indefinite period of time. compliance mechanism — court en- Social Justice in Detroit, Mich., which forcement and legal sanctions — pose tracks WARN cases. Portz said in the study that excep- implementation problems. … By the tions, however, are only one problem But a lot of it has to do with where time a court acts, it is likely that the — and a smaller one at that — with the court case is heard. “There are closing or layoff has already hap- the compliance provisions of WARN. just really mixed results, depending pened ... .”18 The other is enforcement, which is on which jurisdiction is dealing with covered by the courts, not by the Through February 1992, 47 court them,” Fancher says.

Fall 2001 7 MASS LAYOFFS

States and local municipalities also “In the past several years, that WARN will be effectively moni- have the option of taking a company tored is through government regula- that violates the WARN law to court. many of the alleged viola- tion. In addition, he said clearer “But many states have been hesitant language regarding the exceptions to pursue such cases because the law tors of WARN have been needs to be incorporated into the law. doesn’t clearly spell out their right to ‘New Economy’ busi- do so,” Fancher said in a Raleigh, Notes: N.C., newspaper article.19 “Those laid nesses, such as Internet off are often too preoccupied with companies … .” 1. “Plant Closing: Advance Notice and Rapid Re- their own problems to take a com- sponse — Special Report,” U.S. Congress, Office pany to court, and municipalities are — Mark Fancher, of Technology Assessment, September, 1986, either unaware of the law or Senior Staff Attorney, Appendix B: State and Local Advance Notice stretched too thin to pursue such mat- Programs, pp. 56-60. ters,” he said.20 National Lawyers Guild/ 2. “President Yields on Layoffs Bill,” Associated In January, Connecticut became the Maurice and Jane Sugar Press, published in The Arizona Republic, Aug. first state to sue a company for not Law Center for Economic 3, 1988, p. A6. complying with the WARN Act. The state’s Attorney General, Richard and Social Justice 3. “Plant-closing law loophole mulled,” Baltimore Blumenthal, filed a lawsuit against Sun, published in The Phoenix Gazette, Aug. 3, Walker Digital, an intellectual property 1988, p. A3. research and development lab in Stam- Although WARN and the MLS pro- 4. “Plant Closing: Advance Notice and Rapid Re- ford, Conn., for having laid off 106 of gram have different triggering mecha- sponse — Special Report,” U.S. Congress, Office 120 employees last year without nisms and thresholds for defining a of Technology Assessment, September, 1986, proper notice.21 And in November, it mass layoff, the GAO and BLS worked Appendix B: State and Local Advance Notice was reported that the city of Phoenix out a system to filter out the programs’ Programs, p. 1. was considering taking Southwest Su- differences to come up with compara- ble data, Ockunzzi said.23 permarkets to court when it suddenly 5. Ibid., p. 5. shut down and laid off all of its em- In a less scientific way, Portz’ study ployees at seven of its grocery stores compiled data on WARN notices for 6. “How often do workers received advance notice of layoffs?,” Sharon P. Brown, Monthly Labor Re- in Phoenix and Tucson.22 the first two years of the program and compared it to MLS data in an at- view, U.S. Dept. of Labor, Bureau of Labor Sta- Possibly because of confusion over tistics, June 1987, pp. 13-17. WARN, many workers in state agen- tempt to gain a general sense of cies that receive WARN notices, be- whether companies were providing 7. Ibid. advance warning. The study’s results lieve, correctly or incorrectly, that 8. “WARN and the States: Implementation of the employers are not filing WARN no- tended to support views from state officials that the number of WARN Federal Plant Closing Law,” John Portz, pre- tices when they are required to, said sented at the Annual Meeting of the Midwest Lou Ockunzzi, a senior evaluator with notices being filed were not corre- sponding to what was occurring in Political Science Association, Chicago, Ill., April the GAO, which concluded a study of 1992. WARN in 1993. Ockunzzi said the the economy, Portz said, showing GAO study looked at several aspects that in only about three-fifths of cases 9. “Statement on the Worker Adjustment and Re- of WARN, including the number of where the MLS program showed training Notification Act, Public Papers of the WARN notices issued, whether em- there were mass layoffs, did states re- Presidents of the United States, Ronald Rea- ployers were providing notice and in ceive WARN notices. gan,1988-89, Book 2, Office of the Federal Reg- a timely fashion, problems with im- In the past several years, many of ister, pp.1009-1010. plementing WARN (e.g., confusing the alleged violators of WARN have 10. “Reagan. Bowing to Pressure, Won’t Veto provisions), and court cases. been “New Economy” businesses, Plant-Closing Bill,” Washington Post, Aug. 2, Pertaining to the WARN notices, the such as Internet companies, that 1988. p. A1. quickly dissolved when the economy GAO study attempted to measure 11. “Plant Closing: Advance Notice and Rapid Re- whether there had been compliance went south in 2000, said Fancher. “A significant number of them did not sponse — Special Report,” U.S. Congress, Office with WARN by comparing the number of Technology Assessment, September, 1986, of WARN notices issued in 1991 with comply with WARN. They thought they could get around it.” he said. Appendix B: State and Local Advance Notice the number of “mass-layoff events” Programs, p 2. tabulated by BLS’ Mass Layoff Statistics As suggested by the GAO report, (MLS) program (see related story). Fancher believes that the only way (continued on page 14)

8 Arizona Economic Trends MASS LAYOFFS

toward providing more useful infor- BLS Program Goes mation to states relating to dislocated workers — employees, through no in Search of fault of their own, who are laid off in a declining industry (e.g., mining, tex- Mass Layoffs tiles). When the MLS program started “Next Generation” PLANT up again in April 1995, it began using a PC-based system that tracks not of MLS System Provides ENTRANCE only mass layoffs at larger-sized busi- More Detailed Information CLOSING nesses (100 or more employees), but dislocated events and closures of Note: Portions of this article were AHEAD smaller-size businesses (at least 15 originally published in the April 1992 employees) that previously had not issue of Arizona Economic Trends. been part of the program. This infor- Since that time, the Mass Layoff Statis- mation, in turn, is used by state’s Dis- tics (MLS) program was discontinued located Worker Units (funded under (November 1992), then brought back the federal Workforce Investment Act) to life (April 1995) with numerous to contact these businesses in order changes. 1992, before restarting in the second quarter of 1995. Currently, all 50 to help laid-off workers get back into Program Overview states, Washington D.C., and Puerto the labor force as quickly as possible (see related story, front page). The U.S. recession of the early Rico participate in the program. The MLS program could easily be 1950s marked a major turning point The program was originally called confused with a more prominent La- in the country’s post-World War II the Permanent Mass Layoff and Plant bor Department program tied to mass economic history. While the nation Closing (PMLPC) program. But the layoffs, the Worker Adjustment and had several economic downturns in name was changed in 1989 to the Retraining Notification Act (WARN) the previous three decades, the reces- Mass Layoff Statistics (MLS) program program (see related story, p. 3). Al- sion of early 1980s not only produced — as part of a minor overhaul of the though both programs use similar cri- high unemployment rates — averag- program — to more accurately reflect teria for identifying mass layoffs, the ing close to 10 percent — but began its primary scope and planned purpose and rules covering the two exposing severe cracks in the nation’s changes in the program. industrial base, particularly in the programs are quite different. manufacturing sector. Because of the At the time, the major objectives of The MLS program collects data on severity of that recession, Congress in the BLS program were to identify: 1) mass layoffs that have already oc- 1982 created a program as part of industries being impacted by mass curred or are in the process of occur- newly created job-training legislation layoffs; 2) the magnitude and reasons ring, while WARN, started in 1989, is — the Job Training Partnership Act for mass layoffs; 3) geographic loca- simply an employer-notification pro- (now the Workforce Investment Act) tions of mass layoffs; and 4) the con- gram that attempts to provide em- — to track and study the magnitude tinuing financial and employment ployees and affected communities and impact of U.S. plant closings and impact on workers who lose jobs with a reasonable notice (at least 60 mass layoffs. through mass layoffs. The last goal days) of an expected layoff or plant was accomplished through tracking The Department of Labor’s Bureau shutdown as a way to soften the im- laid-off workers’ UI benefit history, of Labor Statistics (BLS) was assigned pact of worker dislocation should it such as the length of time UI benefits this task and began a pilot project in actually occur. are drawn and whether benefits are 1984 involving seven states (including exhausted before re-employment. How MLS Program Works Arizona) to test the feasibility of using state unemployment insurance (UI) In November 1992, however, the The MLS program identifies a benefit files to track mass layoffs. It MLS program lost its funding and mass-layoff event through UI’s files of proved successful and by the second ceased to officially exist, although initial claimants. An initial claimant is quarter of 1985, BLS and about 10 states were free to continue to track an individual who has just become states began officially tracking mass MLS information on their own with unemployed, applies for UI benefits, layoffs through this system. By 1991, their own funding. But under Presi- and has earned enough wages to 48 states and Washington D.C. had dent Clinton’s administration, then qualify for some level of benefit pay- joined the program. The program, Secretary of Labor Robert Reich ment (see Table 2 for definitions of however, was stopped at the end of re-funded the program with an eye MLS terms).

Fall 2001 9 MASS LAYOFFS

Each state has the option of tracking mass layoffs of 20 or more or 50 or Table 1 more workers. Arizona uses the 50+ Background on Mass Layoff Statistics Program criteria because state officials believe the lower criteria would likely iden- Overview tify “events” that are inconsistent with the concept of a “mass layoff” as an The Mass Layoff Statistics program is a federal-state cooperative statistical effort which uses a unexpected dislocation of a large standardized, automated approach to identify, describe, and track the effects of major job cut- number of employees.”1 backs, using data from each state’s unemployment insurance database. Establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a con- Depending on the state, an em- secutive five-week period are contacted by state agencies to determine whether those separations ployer who has 20 or more or 50 or are of at least 31-days duration, and, if so, information is obtained on the total number of per- more UI initial claims filed against sons separated, reasons for these separations, and recall expectations. Establishments are identi- them in any given contiguous fied according to industry classification and location, and unemployment insurance claimants are five-week period is flagged as poten- identified by such demographic characteristics as age, race, sex, ethnic group, and place of resi- tially having had a major layoff. The dence. The program yields information on an individual’s entire spell of unemployment, to the employer is then contacted — either point when regular unemployment insurance benefits are exhausted. It provides databases of es- by telephone (the preferred method) tablishments and claimants, both of which are used for further research and analysis. or letter — to determine if a mass lay- off had occurred, how many employ- Data Available ees were laid off, and the reason(s) Monthly data report summary information on establishments which have at least 50 initial claims for for the layoff. unemployment insurance (UI) filed against them during a five-week period; data available for 50 Verification must be obtained di- states, District of Columbia, and Puerto Rico, as well as by industry; quarterly data report on estab- rectly from the employer, not a sec- lishments which have at least 50 initial claims filed against them during a five-week period and ondary source, such as a newspaper. where the employer indicates that 50 or more people were separated from their jobs for at least 31 If the employer refuses to cooperate, days; information obtained on the total number of persons separated, reasons for separation, the employer is considered as having worksite closures, recall expectations, and socioeconomic characteristics on UI claimants — such as had a mass layoff. gender, age, race, and residency. These characteristics are collected at two points in time — when an initial claim is filed and when the claimant exhausts regular UI benefits. In between these points, Of course, if an employer fails to the unemployment status of claimants is tracked through the monitoring of certifications for unem- cooperate, there is a potential source ployment (continued claims) filed under the regular state UI program. of bias in the collection and interpre- tation of mass-layoff data. As a result, Coverage state agencies make every effort to Monthly, quarterly, and annual data for 50 States, the District of Columbia, and Puerto Rico. Monthly obtain employer cooperation to en- data are available since April 1995; quarterly data since second quarter 1995. sure that on an aggregate basis, data can be used with confidence by gov- Sources of Data ernmental and private agencies, as Monthly data are based on the administrative records of unemployment insurance filings and es- well as the general public. tablishment classifications. Quarterly data are based on administrative data supplemented with Not all categories of UI claimants employer confirmation of layoffs and plant closings and additional employer-provided data. are used to identify an employer as Uses potentially having had a mass layoff. Sub-state allocations of federal funds for dislocated workers through the Economic Development For example, shared-work claimants and Worker Adjustment Assistance Act; analysis of ailing industries or geographic areas, identi- are not unemployed and, therefore, fying causes and scope of worker dislocation, especially in terms of the human and economic 2 are excluded from layoff totals. Also, costs, and the characteristics of dislocated workers; development of approaches for work force claimants living in Arizona but draw- planners and labor market analysts in assisting employers and/or workers at the local level; anal- ing benefits in another state are ex- ysis of potentially available labor market supply. cluded, as are strikers unless they subsequently lose their job as a result Source: U.S. Department of Labor, Bureau of Labor Statistics of the hiring of non-union workers. Included in UI claimant totals are workers indirectly affected by a strike. when, where, and if a claimant will means working for at least one em- Also, not all layoffs in the state will file for benefits; and the manner in ployer covered by UI laws and hav- be identified as a “mass layoff” by the which an employer conducts a layoff. ing made sufficient wages in the first MLS program because of UI claimant To qualify for benefits, a claimant four of the last five quarters.3 Thus. if eligibility rules; the uncertainty of has to be monetarily eligible, which an employer laid off 50 employees

10 Arizona Economic Trends MASS LAYOFFS

and meaningfulness of the MLS pro- and all but one was monetarily eligi- Table 2 gram, MLS data are governed under ble, the layoff would not be identified Selected MLS Program Terms strict BLS confidentiality rules. Only as a mass layoff by the MLS program.4 state and federal employees involved in cooperative/state BLS employment There are other instances where lay- Establishment. A unit at a single physical lo- offs of 50 or more UI-eligible workers security programs are allowed access cation at which predominantly one type of to employer data. are not picked up by the MLS pro- economic activity is conducted. gram. One example is when enough Also, when mass-layoff data are of a company’s laid-off employees Initial claimant. A person who files any no- published in annual reports, it has to find jobs before filing for UI benefits, tice of unemployment to initiate a request be aggregated and presented in a bringing down the layoff total under either for a determination of entitlement to manner so that identification of par- the triggering level (50, in the case of and eligibility for compensation, or for a ticipating companies cannot be deter- Arizona). Another is when layoffs oc- subsequent period of unemployment within mined.7 Requests from the public for cur over an extended period of time a benefit year or period of eligibility. data that would identify individual due to the way a business’s opera- Layoff. The separation of persons from an employers are turned down because tions wind down. An employer could employer as part of a mass-layoff event. of this rule. Confidentiality rules, lay off 200 employees, but spread it Such layoffs involve both persons who are however, do restrict the amount of out over three or four months so that subject to recall and those who are termi- Arizona data that can be published in total initial claims over any contigu- nated. the MLS’ annual report due to the rel- ous five-week period never reaches atively small number of companies in the trigger level. This scenario has Mass layoff event. Fifty or more initial certain statewide industry groups.8 occurred a number of times in the claims for unemployment insurance benefits history of Arizona’s MLS program. from an establishment beginning in a given Additional Uses of MLS Data month, regardless of duration. In addition to the initial claims trig- Although the primary purpose of ger level, two conditions as part of a Extended layoff event. An event in which the MLS program is to assess indus- layoff event have to be met before a 50 or more initial claims for unemployment tries and areas of the country where loss of workers is counted as a mass insurance benefits from an establishment structural dislocations are occurring, layoff by the MLS program. An em- are filed during a 5-week period, with at there are other possible uses for MLS ployer has to report it laid off at least least 50 workers separated for more than data on a statewide and national ba- 50 workers for longer than 30 days. 30 days. sis, according to BLS economist Lewis Verification of the number of laid-off Siegel, who has overseen the MLS Worksite closure. The full closure of either workers, also known as separations, program since the early 1980s. multi-unit or single-unit establishments, or and the time period can only come the partial closure of a multi-unit establish- One major use of mass-layoff data directly from the employer. As a re- ment in which entire worksites affected by for states, Siegel says, is for workforce sult, layoffs of a substantial number of layoffs are closed or planned to be closed. planning and economic development. workers could be excluded from the For example, when layoffs occur in MLS program, while those of tempo- Source: U.S. Department of Labor, Bureau certain industries or regions of a state, of Labor Statistics rary nature could be included in MLS economic-development officials can figures.5 use that information to attract compa- Another factor determining if a nies to those areas. This benefits un- mass-layoff event has occurred is a all the conditions mentioned above employed workers with desired skills company’s number of physical loca- have to be met, plus one other re- and can offer employers a skilled tions. Some employers have a num- quirement — all physical locations in workforce at a more competitive ber of physical locations engaged in Arizona have to be closed. There wage. the same economic activity (e.g., su- have been events during the MLS pro- Another use of MLS data for states is permarkets). The MLS program re- gram’s existence where all physical for determining funding levels for quires that even if one location lays locations were closed, except for ad- state (and their local area) Dislocated off less than 50 workers, if the aggre- ministrative offices, and the events Workers Units (funded under the gated separations over all locations were treated as reductions in force Workforce Investment Act, see are 50 or more and they are part of rather than plant closings.6 above). If a region of a state is ad- the same layoff event, then the em- versely affected by mass layoffs, then ployer had a mass layoff. MLS Needs Employers’ Help more WIA funding will be required Finally, in order for a mass-layoff Because information obtained from for those areas. event to qualify as a “plant closing,” employers is necessary to the utility On a national level, MLS data has

Fall 2001 11 MASS LAYOFFS

Table 3 Selected State Distribution: Extended Mass Layoff Events, Separations, and Initial Claimants for Unemployment Insurance,1998-2000

Initial Claimants for Layoff Events Separations Unemp. Insurance

State 1998 1999 2000 1998 1999 2000 1998 1999 2000

Arizona · · · · · · 74 68 99 11,663 24,350 22,002 14,141 12,716 17,334

California· · · · · · · 1,428 1,490 1,323 292,436 336,325 316,299 347,410 252,382 230,590

Colorado · · · · · · · 31 23 40 4,163 3,455 10,122 3,814 2,347 5,089

Florida · · · · · · · · 303 209 293 64,168 39,249 53,721 39,996 28,031 48,681

Massachusetts· · · · · 100 124 130 20,350 33,975 37,362 18,391 21,050 29,904

Michigan · · · · · · · 245 384 358 65,941 54,549 58,255 101,435 63,535 66,527

Nevada · · · · · · · 35 55 31 6,672 8,578 5,050 6,245 6,929 4,297

New Mexico · · · · · 33 25 19 6,624 4,843 3,846 3,977 3,175 1,915

New York · · · · · · 272 201 213 46,267 40,803 33,198 44,669 31,552 35,148

Oregon· · · · · · · · 60 79 73 9,658 13,493 18,422 8,824 9,896 18,405

Texas· · · · · · · · · 353 413 342 73,585 71,913 68,082 84,782 91,156 76,979

Utah · · · · · · · · · 22 24 26 3,916 6,479 6,782 3,346 2,837 3,002

Washington · · · · · 89 85 103 18,206 22,900 22,369 12,846 19,516 20,360

Notes:

1 Data on layoffs were reported by employers in all States and the District of Columbia.

2 See Figure 1 (on page 2) for mass-layoff separations data for first three quarters of 2001.

Source: U.S. Dept. Of Labor, Bureau of Labor Statistics, July 2001 been used for a number of purposes, For example, a BLS study used MLS ers covered in the study “were highly including testing the effectiveness of data to look at employers’ layoff and likely to be recalled by their former other government programs, and recall practices as one method for de- employers”9 — thus opening up the making employment training and termining if Department of Labor possibility that some retraining funds other public officials aware of areas funds for retraining laid-off workers for dislocated workers are being of the economy being impacted by were being used effectively. By using wasted on workers who are later re- defense cutbacks. MLS data, BLS determined that work- called. Also, because of the reduc-

12 Arizona Economic Trends MASS LAYOFFS tion in Department of Defense spend- ing during the late 1980s and early “The biggest shortfall (of Effect of 9/11 Events ’90s, as of 1990 the MLS program be- the MLS program) is we on Mass Layoff Data gan collecting data related to military cutbacks. The MLS program tracks don’t identify occupa- In a report of extended mass lay- and provides information in its annual tions (of individuals laid offs covering the five weeks follow- publication on mass-layoff events in- ing the terrorist attacks of Septem- volving about 10 Standard Industrial off in mass layoffs).” ber 11 (the weeks ending Septem- Code (SIC) industry groups regarded ber 15 through October 13), em- as defense-related (e.g., guided mis- — Lewis Siegel ployers reported 292 events involv- 10 siles and space vehicles (SIC 36)). Economist and ing 88,508 workers separated as a This information is tabulated on a na- MLS Program Manager, direct or indirect effect of the at- tional basis, as well as for the top 100 tacks. metropolitan areas. U.S. Dept. Of Labor, Twenty-seven states reported ex- Future of MLS Program tended mass layoff activity related to successfully argued that in tight bud- In 1989, as part of minor overhaul the September 11 incidents. How- getary times the MLS program and its of the MLS program, BLS asked fed- ever, 68 percent of these events and annual cost of about $6 million eral and state officials involved with 72 percent of the associated separa- ranked low on the priority list of BLS the MLS program for ideas to improve tions occurred in just six states programs. the program. Out of about 100 rec- —California, Nevada, New York, Illi- ommendations, a number of propos- At that time, however, Siegel coun- nois, Texas, and Hawaii. Among als were adopted by BLS in 1992, but tered the first argument by saying that the workers laid off because of the were not implemented until the pro- the MLS program produced “a wide terrorist attacks, 43 percent, or gram was re-instituted in 1995. range of unique data that were not 37,730, had been employed in the Among these were: available in any other BLS programs.” scheduled air transportation indus- • developing a PC-based system For instance, Siegel said there was a try. An additional 36 percent, or that can be run by all states — major distinction between the CES 32,161 workers, had been employed previously each state ran its own and MLS programs in that CES mea- in hotels and motels. program —that will collect more sured net change in industry employ- A report on extended mass layoff socioeconomic data on UI initial ment, while MLS looked at gross events identified through Novem- claimants, such as ethnic groups, change. By looking at gross change, ber 17 will be issued in late De- older workers, and veterans. employment fluctuations and industry trends were much easier to detect, cember 2001 as part of the regular • extending the time period — Siegel said. release of mass layoffs that oc- from three to five contiguous curred in November 2001. This in- weeks — for initial claims on a In addition, Siegel said that the MLS terim reporting will provide a more company to qualify as a mass-lay- program had persevered despite its timely and complete picture of ex- off event, in order to capture lay- tenuous history. Siegel said the uncer- tended layoff events associated offs that currently may be missed. tainty of the MLS program’s fate over with the September 11 attacks. • offering more information on an the years had made implementation establishment’s employment level of the program — in terms of plan- — U.S. Department of Labor, prior to layoffs or a plant closing, ning, MLS employee morale, and Bureau of Labor Statistics and specifying areas within com- bringing all states on-line — a more panies laying off workers or shut- difficult process than if the program Siegel. “We’ve expanded data collec- ting down. had been supported all along. tion, identified more potential clients In 1992, opponents of the MLS pro- But with a number of changes that to receive dislocated worker funding, gram claimed that much of the infor- have been made since the program and done a better job in identifying mation produced could be deduced was restored in 1995, it’s likely there plant closures.” from other BLS labor-market pro- may be fewer detractors of the MLS grams that track employment and in- program and its popularity will grow. Among new data the program now dustry detail, such as the Current “We’ve tailored the program (to our captures are: potential worker dislo- Employment Statistics (CES) and Cur- major clients’ needs), collecting infor- cations and plant closures as small in rent Population Survey (CPS) pro- mation more relevant to the dislo- size as 15 people; individuals who grams. And those opponents cated-worker community,” says appear to be part of a potential dislo-

Fall 2001 13 MASS LAYOFFS

but have had their work hours reduced by at the event counted as a mass-layoff event. cation event, but work for an estab- least 10 percent, but not more than 40 percent. lishment that doesn’t have any em- Shared-work claimants receive a percentage of 6. Although the MLS program still keeps track of ployment history listed in the their unemployment insurance benefits based plant closings, it does not publish this data as Unemployment Insurance (UI) files; on the percentage that their normal weekly part of its annual MLS report. and declining industries across all in- work hours have been reduced. dustry groups (e.g., not just the de- 7. Like other BLS programs, aggregate data on par- fense industry). 3. Monetarily eligible claimants are determined by ticular industries cannot be divulged to the pub- One area of data that Siegel wants one of two factors: either they have earned at lic if the industry is represented by fewer than to eventually include in the MLS pro- least $1,000 in their highest earnings quarter and three employers, or if one employer accounts gram is occupational information on total earnings over four quarters have equaled for 80 percent or more of the separations. individuals that are laid off. “The big- or exceeded 1.5 times the high quarter earnings; gest shortfall (of the MLS program) is or they have earned at least $7,000 in the total 8. For example, Mass Layoffs in 1990, Bulletin we don’t identify occupations (of in- base period (first four of the last five quarters) 2395, U.S. Department of Labor, Bureau of La- dividuals laid off in mass layoffs) ,” and have earnings in at least two of the quar- bor Statistics, February 1992. Siegel says. ters. 9. “Employer Layoff and Recall Practices,” pre-

— Stan Gorodenski, RA Economist and 4. This type of situation may occur when a com- pared for U.S. Department of Labor’s Employ- former Arizona MLS Program Manager pany employs a large number of “new entrants” ment and Training Administration by U.S. Also contributing to this story was into the labor force (e.g., recent college gradu- Department of Labor’s Bureau of Labor Statis- Brent Fine, Arizona Economic Trends ates), who have a greater likelihood of not qual- tics, January 1992, Executive Summary and Pref- Editor ifying for UI benefits due to insufficient wages. ace, pp. iii-vi.

5. For example, if 100 initial claims were filed 10. The Standard Industrial Classification (SIC) sys- Notes: against an employer, but the employer states tem is the statistical classification standard un-

1. It is common operating practice for agricultural only 49 employees had been laid off (sepa- derlying all establishment-based federal companies in the state to temporarily hire large rated), then the layoff event is not considered a economic data. The structure of the SIC systems numbers of migrant workers, who then move mass-layoff event for MLS program purposes. makes it possible to tabulate, analyze, and pub- on to another crop either in Arizona or another Similarly, the MLS pro gram does not count a lish employment data on four levels, according state when the crop season ends. Even using layoff event if an employer lays off 50 employ- to the amount of industry detail considered the 50+ criteria, Arizona’s MLS program picks up ees but recalls one on the 30th day. Conversely, most appropriate. The four levels are: division a good number of layoff events that are sea- there have been instances of employees being (one digit), major group (two digit), industry sonal in nature. laid off for a short time period (such as six group (three digit), and industry code (four weeks) due to plant maintenance and repair, digit). AET 2. Shared-work claimants have not been laid off but because the recall date exceeded 30 days

WARN Has Too Many posed Mandatory Advance Notification Legisla- 22. “Store closings lawful,” Associated Press, pub- tion,” Robert R. Nathan Associates, Inc,. lished on Arizona Central Internet site Loopholes, Officials Still Say Washington D.C., January 1988. p.8. (www.azcentral.com), Nov. 2, 2001. (continued from page 8) 23. The Mass Layoff Statistics (MLS) program identi- 12. “Easing the worker’s transition from job loss to 16. “WARN and the States: Implementation of the fies “mass-layoff events” through unemployment employment,” Ruth H. Fedrau, Monthly Labor Federal Plant Closing Law,” John Portz, pre- insurance files of initial claimants. An initial Review, U.S. Department of Labor, Bureau of La- sented at the Annual Meeting of the Midwest claimant is an individual who has just become bor Statistics, May 1984, pp.38-40. Political Science Association, Chicago, Ill., April unemployed, files for U.I. benefits, and has 1992. p. 8. 13. “The Private and Public Sector Costs of Pro- earned enough wages to qualify for some level posed Mandatory Advance Notification Legisla- 17. Ibid., p. 9. of benefit payment. For most states, when 50 or tion,” Robert R. Nathan Associates, Inc., more U.I. initial claims are filed against a com- Washington D.C., January 1988. pp. 18-22. 18. Ibid., p.9. pany in any given contiguous three-week pe-

14. “Plant Closing: Advance Notice and Rapid re- 19. “Stealth Layoffs Challenge North Carolina Em- riod, it is flagged as potentially having had a sponse — Special Report,” U.S. Congress, Office ployment Security Commission,” Karin Schill major layoff. The employer is then contacted to of Technology Assessment, September, 1986, Rives, The News & Observer, July 20, 2001. determine if a mass layoff had occurred, how Appendix B: State and Local Advance Notice many employees were laid off, and the rea- AET Programs, p 2. 20. Ibid. son(s) for the layoff.

15. “The Private and Public Sector Costs of Pro- 21 Ibid.

14 Arizona Economic Trends M A N U F A C T U R I N G

Note: This issue includes the period affected by the Sept. due to an expected decline in demand for commercial air- 11 terrorist attacks. craft due to the terrorist attacks. Scottsdale is home to two up-and-coming manufac- Phoenix Metro Area turers that have been in the news lately. National Scien- Manufacturing tific Corp., which employs about 10 people, was expected to merge its Phoenix and San Jose, Calif., opera- Schaumburg, Ill.-based Motorola Inc. announced several tions in early October. The company designs and licenses major cuts in operations in September and October. In products — low-power memory, amplifiers — used in eliminate 2,000 early September, Motorola said it would small environments, such as laptop computers and cell more jobs — all from its Global Telecom Solutions Sec- phones. The other high-flying Scottsdale business is tor (GTSS), which has major operations in Arizona. The Medicis, a pharmaceutical company that produces company cited lower-than-expected demand for its cellular skin-care products. Medicis has issued one new product phone-network products. No information was available a year the past 10 years, including Dynacin, the No. 1 oral on how many of its 1,300 GTSS employees at a Chan- treatment for acne. The company plans to expand its na- dler facility (2501 S. Price Road) would be affected. The tionwide sales force by 25 percent. news comes only a few weeks after Motorola announced that it was shutting down its semiconductor operations in Western Container signed a 10-year lease to produce Mesa over the next 2½ years. Then, in mid-October, recyclable plastic bottles for Coca-Cola at a Motorola said it plans to eliminate another 7,000 posi- 285,000-square-foot manufacturing facility that will be tions. The new job cuts, however, may not be as bad as it built in Tolleson. Centex Investment Co. of Dallas will appears because 4,000 of the positions are in Motorola’s In- develop the plant on 20 acres at 99th Avenue and Buckeye tegrated Information Systems Group, which was recently Road. Western Container expects to initially hire a little sold to General Dynamics. And Virginia-based General Dy- more than 100 people when the plant opens next June. namics said it doesn’t plan to eliminate those jobs. The Construction other 3,000 positions will come through attrition and layoffs across all operations worldwide, although The off-and-on Scottsdale Waterfront project is off Motorola hasn’t specified where and when the cuts will again. The planned 11-acre mixed-use development at come. Since the beginning of 2001, the electronics manu- Scottsdale and Camelback roads hit another roadblock in facturer has announced layoffs of 39,000 workers, or about mid-September when the two current developers (Arte- 20 percent of its worldwide workforce. mis Realty Investors and Starwood Western Capital) de- cided to dissolve their agreement. Concerns over the Despite the economic downturn and recent terrorist at- viability of the office building and hotel portion of the pro- tacks, with little fanfare Intel Corp. officially opened its ject, in light of the weakened economy and terrorist events, third fabrication plant in Chandler and 22nd overall in led to the deal’s demise. A residential- and retail-only de- mid-October. The $2 billion, 360,000-square-foot facility, velopment is now envisioned. Prior to this agreement, a which currently employs 1,800 workers (of which 1,000 much larger project was planned by another developer, but are new), will make Pentium 4 microchips used in concerns over the project’s size and scope led to it being high-end desktop and laptop computers. Intel expects pro- scrapped. duction of the first chips at Fab 22 to begin in November, with the plant reaching full production in 2003. It is the Transportation, Communications, and Public Utilities second fabrication facility (Fab 6 opened in 1996) on the As a direct result of the terrorist attacks, two Val- 705-acre Ocotillo campus, Dobson Road and Ocotillo Bou- ley-based airlines announced major cutbacks in levard. As part of the project, which took only 18 months, mid-September. Tempe-based America West Airlines re- two support facilities totaling 443,000 square feet were also duced their flight schedule 20 percent and laid off 2,000 constructed. employees. America West, which had 14,000 employees Valley-based Honeywell Aerospace said it will elimi- system-wide prior to the cuts, said the layoffs would be im- nate 1,500 Phoenix-area jobs as part of a worldwide re- plemented by attrition, deferred hiring, and selected reduc- trenchment of 4,800 positions. The division of New tions in force. No specific information was given about Jersey-based Honeywell International, which employs the number of people affected in Arizona, but the com- 14,000 Valley workers, makes a variety of products for pany notified the state — through the federal Workforce commercial aircraft, operating eight plants in the Valley and Adjustment and Retraining Notice (WARN) program — that another in Oro Valley north of Tucson. The layoffs — it was laying off 2,000 workers, so it’s likely most of those which come on top of 9,000 Honeywell International job affected will be in Arizona. At the same time, Phoe- cuts (800 in the Valley) announced earlier this year — is nix-based Mesa Air Group Inc. said it would lay off 700

Fall 2001 15 employees system-wide, including 200 of its 1,000 Val- Single-family housing permits were up more than 20 per- ley workers. The company, which operates New Mex- cent, year over year, in August, and home re-sales were up ico-based Mesa Airlines, employed about 4,000 people 9 percent for the same period. But a Phoenix housing ana- prior to the cuts. lyst expects the real estate market to weaken significantly, despite setting yearly records for new homes and re-sales As a direct result of the Sept. 11th events, Sky Harbor In- in 2001. The refinancing market, however, is expected to ternational Airport has stopped working on most of its continue to stay strong because of expected lower interest planned $1.2 billion in expansion projects. Among rates. projects halted were a $200 million rental car facility, a $35 million parking structure, and a $650 million mega-terminal Trade that would replace terminals 2 and 3. Sky Harbor had Bartlesville, Okla.-based Phillips Petroleum Co. imple- based its expansion plans on annual passenger totals grow- mented the first of several expected job cuts after it of- ing from 36 million in 2000 to an estimated 45 million by ficially completed its takeover of Tosco Corp. in 2006. mid-September. About 20 employees of Tempe-based Global Crossing, an international communications com- Tosco Marketing, which oversees the operation of 6,400 pany, was planning to open a state-of-the-art $8 million Circle K convenience stores, were laid off, with more of customer-support and research center in Ahwatukee the former Tosco subsidiary’s 1,364 employees expected to in November. Expected to employ 200 people within get unemployment notices. In July, the Tosco division laid two years (and potentially expand to 400) in various off 200 employees in anticipation of the merger. It’s ex- high-tech jobs — network engineers and operators; system pected that Phillips will sell off a portion of the Circle K programs and managers — the 65,000-square-foot facility stores. will provide customer service to corporate and government It won’t make it in time for this year’s Thanksgiving Day users of its 100,000-mile fiber-optic network that spans 27 parade in New York City, but Macy’s department store will countries. move into a three-story location at Scottsdale Fashion Finance, Insurance, and Real Estate Square vacated earlier this year by Sears. A part of Cincinnati-based Federated Dept. Stores, Macy’s will begin A $7.7 billion bankruptcy plan for Scottsdale-based renovating the 250,000-square-foot store after January, with Finova Group Inc. may be in jeopardy due to events as- an expected opening next fall. The Fashion Square store sociated with the terrorist attacks. One of the backers of will be Macy’s fifth Valley location and seventh overall in the plan, Berkshire Hathaway Inc., said it would not Arizona. buy $500 million worth of $3.25 billion in bonds issued to creditors in September. Berkshire Hathaway and Services Leucadia National Corp. formed Berkadia LLC as part of the To speed up the road to profitability, a Scottsdale-based bankruptcy plan to hold a 50 percent stake in Finova. But maker of Internet learning programs laid off 8 per- concern about potential losses for Finova, which special- cent of its workforce, or 28 people, in early October. izes in leasing aircraft ($1.8 billion in leases), and its own KnowledgeNet, which will still have 300 employees, made exposure as the nation’s largest reinsurer (insurer for insur- the cuts in administrative and operations positions. Inves- ance companies) has given Berkshire Hathaway “cold feet.” tors put pressure on the start-up technology company to Unrelated to the terrorist attacks, insurer USAA an- show a profit by the third quarter of 2002, when nounced in August that it was cutting nearly 1,400 jobs, KnowledgeNet plans to issue stock. Since the Sept. 11th or 6 percent of its workforce. The job cuts, however, were terrorist attacks, KnowledgeNet has picked up an addi- not expected to affect USAA’s new customer service tional $5 million in business, as companies are turning center in north Phoenix, which plans to add a couple to e-learning to avoid spending money on travel costs. hundred workers to its workforce of 300 by the end of One industry that hasn’t been affected by the terrorist at- the year. Eighty-five percent of the cuts, which were ne- tacks is health care. And Good Samaritan Regional Med- cessitated by a drop in earnings, were planned for the ical Center, 3rd Street and McDowell Road, is celebrating company’s corporate headquarters in San Antonio. its 90th birthday by announcing plans for a $90 million ex- Due to continued economic and stock market weakness, pansion of its central Phoenix operations. Good Samari- Charles Schwab Corp. announced it would lay off by the tan will increase bed capacity from 508 to 625; add a end of October up to 2,400 employees, or 11 percent of new intensive care unit, which is expected to open in its workforce. The cuts come on top of 4,500 jobs elimi- January; construct a new facility to house ambulatory nated (including 600 in the Valley) by the San Francisco- care, medical imaging, and cardiac services; and build a based financial services company earlier this year. As of new parking structure. The entire project is expected September, the top U.S. discount brokerage has about to be completed by 2004. Good Samaritan is a subsidiary 3,000 employees in the Phoenix metro area. of Banner Health Systems, which operates hospitals in 14 states, including six others in the Valley. Prior to the Sept. 11th events, the Valley housing mar- ket had remained strong, despite a weakened economy. Another industry apparently untouched by the Sept. 11th

16 Arizona Economic Trends events is real estate. One company “bullish” on the Valley duction of its new eight- to 16-seat Continental corporate is CMX Group Inc., a civil engineering and land-man- jets, which will be assembled in Wichita, Kan., then sent to agement company. CMX, which employs 140 in the Phoe- Tucson for interior work, and testing of mechanical, elec- nix metro area, is expanding its operations, in light of its tronic, and avionics systems. Bombardier, which employs involvement with numerous residential projects throughout about 2,000 in Tucson, announced last year that the Conti- Maricopa County and potential work at airports that need nental project would bring 300 new jobs to Tucson. to be redesigned for security reasons. As part of a consolidation plan, Vanguard Automation A Phoenix provider of live Internet-based medical is moving its manufacturing and engineering operations training classes has purchased a Chandler-based com- in Tucson to its corporate home of Hauppauge, N.Y. Van- pany which produces similar types of materials. Through guard, which will eliminate 110 jobs in Tucson (with acquisition of Learning Edge Inc., EDT Learning Inc. will some workers being offered a chance to relocate), makes acquire the company’s award-wining presentation software ball-grid arrays for semiconductors. and access to its high-profile clients (e.g., American Ex- An Antioch, Calif.-based company that makes miniatur- press, Motorola). EDT, which is expected to keep 25 of ized motors opened a design and production facility the Chandler company’s employees, offers Webcast train- (3925 E. 29th St.) in September. NanoMuscle Inc., which ing to dental manufacturers, medical and pharmaceutical produces lightweight motors for toys, cars, and appliances, sales representatives, and others in the health-care field. expects to employ 25 people within a year. A small Valley high-tech company is shifting gears (and Two Tucson machine shops have eliminated positions genes) because of the threat of bioterrorist attacks. Phoe- or postponed the hiring of new workers due to the weak- nix-based Designer Genes Inc., a two-year company ened economy. Competitive Engineering, which makes funded through venture capital, will use a process origi- parts for the aerospace and electronics industries, has laid nally designed to detect cancer and other diseases to de- off about one-third of its workforce of 150, while tect viruses and bacteria, such as anthrax and smallpox. 20-year-old Accurate Products Co. has delayed for several The company’s product, called RiboMax Path, is able to de- years adding a number of positions to its staff of 40. termine much quicker than a laboratory if a patient has one Construction of these deadly diseases, thus potentially saving lives. In addition, Designer Genes currently has a grant from the A 71-year-old nonprofit foundation wants to bring new Army to create vaccines for biological agents. With life to old neighborhood. The Marshall Foundation, less than 10 employees, biological-testing companies plans an estimated $36 million worth of retail, office, such as this firm are likely to see significant increases in and restaurant projects to revitalize 10 acres by the employment based on an industry that is growing 30 per- west entrance to UofA. Construction was set to begin in cent to 50 percent annually. November at North Park Avenue and East Second on a $19 million, 115,000-square-foot building that will feature shop- Government ping, restaurants, and office space. Scheduled completion The Phoenix Internet Institute, which offers a two-year of the five-story project is December 2002. webmaster program, opened in early September with eight Transportation, Communications, and Public Utilities part-time instructors. But the school, which is part of the University of Arizona Extended University, expects to Pending regulatory approval, Tucson Electric Power employ 35 part-time teachers as it expands over the (TEP) expects to begin construction of a natural gas-fired next several years. Located at 2700 N. Central Ave., Suite power plant near Interstate 10 and Rita Road by the end 1120, Phoenix Internet Institute has three labs, with each of the year. TEP expects the Vail Generation Station, consisting of 18 workstations. For more information on which will produce 150 megawatts of power (enough for programs offered, check the school’s web site: www.uaii. 150,000 people), will be completed in late 2003. arizona.edu. Finance, Insurance, and Real Estate Dun & Bradstreet Management Services was expected to open a customer service center in mid-October, with Tucson Metro Area employment expected to grow to 500 by the end of 2002. Manufacturing Tucson was selected over several other western cities (in- cluding Phoenix) because of its abundant bilingual (English The expected acquisition of the largest hangar at Tuc- and Spanish) labor supply, said the company’s president. son International Airport will allow Bombardier Aero- The Tucson facility, which will be one of nine call centers space the room to expand its operations over the next worldwide, will provide services for electronic billing, several years. Bombardier, which makes small and mid-size collections, and bankruptcy. corporate jets, has agreed to purchase three buildings — in- cluding a 234,000-square-foot hangar — formerly owned by Services Lockheed Martin, which closed its Tucson operations in Citing a need for better air service, a more skilled labor 1995. The Canadian-based company is gearing up for pro- force, and being close to research facilities in Los Angles, the

Fall 2001 17 national headquarters of the Muscular Dystrophy Associ- acquired by Castle Rock Industries of Englewood, Colo. ation is considering leaving Tucson. While its 160 em- Castle Rock, which will consolidate Prescott’s manufacturing ployees are not large in terms of employment, MDA’s operations at its Denver-area plant, has offered to relocate national reputation and media exposure bring a lot of atten- workers where possible. Operations at ProChem’s head- tion to Tucson. MDA moved to the “Old Pueblo” in the early quarters and manufacturing facility in Chandler, where it ’90s after Pima County provided $1.5 million in incentives. employs 65, will not be affected by the Prescott closure. One industry apparently immune to terrorist events and a Transportation, Communications, and Public Utilities sluggish economy — at least in Pima County — has been In- Tax and environmental concerns could scuttle plans dian gaming. In mid-October, the Pascua Yaqui Tribe for or hinder construction of two power plants (one in opened a $65 million casino, restaurant, and 4,400-seat am- the U.S. and one in Mexico) along Arizona’s southern phitheater as the first of two phases of development on tribal border. A planned $300 million electric generating fa- land about seven miles southwest of downtown Tucson. This cility 20 miles east of Yuma, scheduled to be operational followed on the heels of the opening in July of the Tohono in 2004, could cause tax problems if its developers form O’odham’s new Desert Diamond Casino, 15 miles west of a limited liability corporation. In that case, the plant may Tucson. The second phase of the Pascua Yaqui’s casino/re- be partially or fully exempt from property taxes, potentially sort project, which is expected to open in a year, will include costing Yuma County $2.3 million a year. Although Yuma a bowling alley, bingo hall, and nightclub. County officials want the power plant, they are lobbying Government the Arizona Corporation Commission against approving a limited-liability corporation, thus possibly scuttling the pro- Partially a victim of the state’s $1.6 billion deficit, Arizona ject. Meanwhile a power plant under construction in International College (AIC) will close its doors after the Agua Prieta, Sonora, Mexico (across the border from school’s 417 students have completed their studies. A Douglas) has come under fire because of concerns over small liberal arts school started as an extension of the Uni- water use and air pollution. Effluent water from Douglas is versity of Arizona, Arizona International was likely to have needed to cool the natural gas-fired plant, but there are gone by the wayside in the near future because only 24 questions if there will be enough water available and the students have graduated in the six years of the school’s ex- potential contamination of the water when it is returned to istence. The school, which employs faculty of 20 and a the system. Although it’s likely the plant will be com- staff of four, operates on UofA’s campus. pleted, several construction modifications may be needed to alleviate environmental concerns. Balance of State With the governor and other dignitaries on hand, the Griffith Energy Plant, 15 miles southwest of Kingman Manufacturing near Interstate 40, began operation at the end of Septem- The economic slowdown has cost about 100,000 jobs in ber. The 600-megawatt natural gas-fired plant, owned by maquiladora plants along the northern Mexico border, PPL Global of Fairfax, Va., and Duke Energy North according to an Associated Press story, with an estimated America of Houston, will employ about 40 people and one-fifth of those job losses occurring in the state of generate enough electricity for about 300,000 homes. Grif- Sonora, across from Arizona. About 3,500 maquiladoras, fith, which will help fuel economic development in or “twin plants,” line the northern Mexican border employ- Mohave County, is one of four generating plants in the ing about 1.2 million workers, with the vast majority across state that came on-line this summer. from Texas and California (see related story in “Miscella- A small telecommunications company in Flagstaff has ex- neous,” below). Typically, major corporations will build a perienced significant growth since it started operations plant on the Mexican side that does more labor-intensive two years ago. Aspen Communications, which has work, while the U.S. plant will handle more capital-inten- grown from two to 16 employees, installs phone systems, sive and high-tech production work. computer networks, and high-speed Internet connections, A job fair by a Valley wood-furniture manufacturer re- as well as develops web sites. The company — which locating to Payson attracted nearly 200 people in pays wages well above Coconino County’s average of $11 mid-September. Chandler-based The Door Stop expects an hour — has clients all over northern Arizona and hopes to employ 60 when it opens its doors next year at the Sky to expand its business throughout the Southwest. For Park Industrial Park. Starting pay for nonsupervisory per- more information, go to its web site: www.aspentelco.com. sonnel will range from $7.50 an hour to $12 an hour, high Finance, Insurance, and Real Estate wages by Payson standards. The Arizona State Parks Board voted 5-1 to acquire The Prescott area received a significant blow when a property adjacent to Kartchner Caverns State Park near maker of chemical carpet cleaners said it plans to close Benson that was slated for a $40 million resort. Fears two local facilities and lay off 90 workers. At one time that building of the proposed Whetsone Springs Resort contemplating expanding its operations in Prescott, the for- on 180 acres off of State Route 90 could endanger tunes of ProChem changed in spring of 2000 when it was Kartchner Caverns’ fragile ecosystem, drove the board

18 Arizona Economic Trends to offer to purchase the property for $1 million or exercise likely see an increase in defense-related orders, such eminent domain if the developer, Helmut Horn of Coastal as helicopters, cockpit and communications equipment, Hotels Group, refuses to sell the property. Horn, who had and missiles. Honeywell recently laid off 1,500 people at received approval for the project from the Benson Planning its commercial aviation operations in Phoenix (see above). and Zoning Commission in July, was planning a lodge However, like Boeing, which is laying off people at its with 216 villas, 128 casitas, spa, swimming pools, and commercial operations in Seattle while its defense opera- tennis courts. tions in Mesa are strong, Honeywell’s military divisions don’t appear to have been hurt by the economic downturn Downey Savings & Loan of Newport Beach, Calif. will and the events of Sept. 11th. open its first two Arizona branches in Bullhead City and Kingman. With $11 billion in assets, Downey Savings Transportation, Communications, and Public Utilities & Loan has 133 branches in California. No expected open- Slower growth will force Qwest Communications Inter- ing dates or employment information were available. national to cut 4,000 jobs, or 6 percent of its workforce. Trade About one-third of the cuts will come from the corporate headquarters in Denver. No information was available Sears became the first major tenant to open in Payson’s on the potential effects on Arizona’s 7,500 Qwest em- Rim Country Mall in late August. The 75,000-square-foot ployees. shopping center on Highway 260 — which occupies a former Wal-Mart building — was initially expected to be fully open Finance, Insurance & Real Estate by the beginning of August. Another major tenant, Payson As part of the American Dream Commitment, Fannie Athletic Club, was expected to open by early November. Mae will make available $15 billion in affordable mort- Services gage loans to disenfranchised Arizonans over the next five years. For example, in Tucson, Fannie Mae is invest- A carpenters strike in mid-August slowed work on the ing $16 million to replace a public-housing project with $35 million expansion of Havasu Regional Medical Cen- new apartments and 190 rental and single-family ter in Lake Havasu City. While work on the first and third homes. A private-sector home mortgage lender, Fannie floors, which will add 30 private beds, is on schedule for a Mae will distribute $2 trillion in loans nationally to groups February opening, second floor additions could be delayed. that have been unable to afford homes over the last decade Government — immigrants, minorities, young families. One program, After beefing up its Arizona ranks (to about 2,000) in re- the Teacher A-Plus mortgage, will allow teachers to pur- cent years, the U.S. Border Patrol might lose a good chase a home with as little as a $500 down payment. number of agents for higher-paying sky marshal jobs. Services In addition, it’s expected that many border agents will be More and more of Arizona’s nursing homes are ex- called up to active duty in the reserves. To prevent addi- pected to go under as part of a national financial crisis tional highjackings, President Bush announced that sky facing the industry. Underpayments of $3 billion in state marshals would begin flying on many U.S. flights. While Medicaid payments have caused hundreds of nursing starting salaries for border patrol agents and U.S. marshals homes to close nationally in recent years — including are about the same (between $35,000 and $37,000), border seven in Arizona in the past year — according to the Ari- agents tend to work long hours and receive fewer benefits zona Health Care Association (AHCA). And many of the than other federal workers. national nursing home chains are likely to close up shop in this state as well, an AHCA official said. In the past three years, Arizona has lost 1,000 nursing home beds, or Statewide about 5 percent of its statewide total, which currently Manufacturing stands a little above 17,000. As fallout from the terrorist attacks, a company that pro- Government vides pre-packaged meals for airlines laid off 175 of its 586 A projected $250 million shortfall for fiscal year Arizona employees. LSG Sky Chefs let go 30 percent of 2001-2002 (July 1, 2000-June 30,2002) is forcing the state its U.S. workforce, or 4,800 employees, in late September. A of Arizona to cut agency budgets by 4 percent, which ulti- cutback in food service on airlines, in addition to severe re- mately could lead to layoffs. Declining revenue from ductions in flights, caused the layoffs. About 450 of Sky state sales and income taxes has caused most of the pro- Chef’s employees work in the Phoenix metro area. jected deficit. AET The U.S. Defense Department is in negotiations with defense-product manufacturers in order to determine how quickly they can gear up operations. Boeing Co., Honeywell, Raytheon, General Dynamics Decision Systems (formerly Motorola’s Integrated Information Systems Group) and other defense companies in Arizona will

Fall 2001 19 MLS Program, WARN Give within the following months (see Fig- ure 1, page 2). A similar correlation, Insight into Mass Layoffs however, was not found when com- (continued from page 2) paring Arizona WARN and nonfarm to track the effects of mass layoffs on payroll data. the nation’s economy (see related Specific details about the MLS and story on page 9). It is run in Arizona WARN programs can be found in this by DES, Research Administration. Arizona Economic Trends is published quarterly by issue from articles that are being re- the Arizona Department of Economic Security, Re- Another source of job-loss informa- published, in part, from the April and search Administration, by authority of the Wag- tion is from data compiled from ner-Peyser Act and through funding provided by the May 1992 issues of Arizona Economic Arizona Worker Adjustment and Retraining U.S. Department of Labor. Reproduction of Trends, which is now published quar- Economic Trends for commercial use is prohibited Notification Act (WARN) notices (see terly. The articles have been updated by Section 39-121, Arizona Revised Statutes. Per- related story on page 3). With some mission to reprint this publication, or parts of it, for to reflect changes over the past 10 non-profit use may be granted upon written request exceptions, the WARN law requires years. The MLS program, WARN leg- (see below for address). medium-size and large companies to islation, and state Dislocated Worker Research Administrator Dan Anderson give early notification (at least 60 programs are designed to work to- Managing Editor Ron Simon days) to workers and communities Editor Brent Fine gether to soften the blow — for Publication Assistant Rosemary Jones when they plan major layoffs or are laid-off workers, as well as local com- The purpose of Arizona Economic Trends is to closing a plant. DES’ Dislocated munities — when massive displace- provide an update and analysis of state and county Worker Unit — which as part of the employment and economic data, as well as informa- ment of workers occurs. (Information tion on state and national programs and policies that state’s Workforce Investment Act pro- on changes to state Dislocated affect the nation’s and Arizona’s labor markets. In- gram provides assistance (e.g., job Worker programs will not be detailed cluded in this publication twice yearly are Research Administration’s two-year projections of employ- training, skills assessment) to workers in this article. For more information ment, unemployment, and labor force for Arizona and affected by mass layoffs — keeps on Arizona’s Dislocated Worker pro- its major sub-state regions. track of that information. gram, see the fall and winter 1998 is- U.S. residents may receive this publication free of charge by writing to: Arizona Department of Eco- One example of the usefulness of sues of Arizona Economic Trends.) nomic Security, Research Administration, P.O. Box MLS data was evident when DES, Re- 6123, Site Code 733A, Phoenix, AZ 85005; or by calling (602) 542-3871. Subscribers who do not wish search Administration found a correla- Notes: to continue receiving the publication are asked to in- tion between Arizona MLS and dicate so in box below and mail to above address. If 1. “When layoffs are announced, numbers don’t al- nonfarm payroll data between October your address has changed, please mark box and return ways add up,” David Leonhardt, New York mailing label with correct address to above address. 1999 and September 2001. In three in- ❏ Times, published in the East Valley Tribune, Would like to subscribe stances where the number of persons ❏ Feb. 20, 2001, p. B1. No longer wish to subscribe involved in Arizona mass layoffs ❏ Change of address spiked during that period — 2. Ibid. Name ______March-April 2000, October 2000, and AET March-April 2001 — nonfarm payroll 3. Ibid. Street Address ______employment dropped significantly — Brent Fine City, State, ZIP ______Arizona Economic Trends Editor

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