Mass Layoffs Up in June

More firms engaged in mass layoffs in June, according to the Bureau of Labor Statistics. The results are disappointing. The number of workers laid off through mass actions of fifty or more increased by 7.2% compared to May. But more alarming is the number of firms that participated in these activities, which increased by 16.6%. That's the biggest jump since August of 2009.

First, here's the chart for the number of workers let go through mass layoffs:

mass layoffs - workers - 2010-06.PNG

The red line above shows number of workers laid off through mass actions each month. The green line is the average from January 2004 through November 2007, before the recession. As you can see, there was a big pop in April, followed by a huge drop in May. Even though June trended in the other direction, it didn't come near reversing all of the decline from May. The level of workers laid off through mass actions each month appears to be normalizing around the 150,000 level, since late last year, if you ignore the noise in the chart. That's a little higher than the pre-recession average of around 132,000.

But in order to gauge business sentiment, it may be more telling to look at how many firms engaged in mass layoffs. Here's that chart:

mass layoffs - firms - 2010-06.PNG

It's harder to talk yourself out of worrying about June's increase here. Again, it doesn't hit the April spike, but it does rise above the number of firms that had mass layoffs in February and March. This could imply that relatively smaller businesses are reducing their workforces. On this chart, the past several months don't appear to be settling around any number, so we might be seeing mass layoff actions moving from large firms to smaller ones. That would bring the overall number of workers affected down, but leave the number of firms taking these actions relatively high.

Considering that we know smaller businesses are still struggling and growing more pessimistic, this hypothesis seems plausible. If this is the case, then a labor market recovery will be even that more difficult. Most job growth comes from smaller firms. If many are still laying people off, then this confirms a very slow decline for the unemployment rate.