More Churn in Job Market Is Hopeful Sign

CATHERINE RAMPELL

Dollars to doughnuts.

The number of people leaving or receiving jobs picked up in September, the Labor Department reported today, a sign that that the labor market may be regaining its health.

Dollars to doughnuts.

Both hires and separations have been relatively stagnant in the last year, with companies too nervous to hire or let anyone go, and employees too frightened to leave their jobs. Separations in particular had reached record lows. But levels of both rose in September.

While a rise in separations, at least, may not sound like welcome news, it means that companies and workers are finally more willing to start making decisions again. Uncertainty about the state of the economy had largely frozen both hiring and firing, and without people leaving their jobs, companies had nobody to replace with new workers. Greater churn in the job market now potentially means more opportunities down the line for the 14 million unemployed workers sitting on the sidelines.

The turnover is still not as great as it was before the recession began, however, when the population was also smaller.

Particularly promising is that the number of quits — that is, workers who voluntarily left their jobs, as opposed to being fired or laid off — rose in September, reaching its highest total since November 2008. That probably means that workers finally feel more confident that they can find new work if they are unhappy with their current position.

The best news was in job openings, which was at its highest level since August 2008, the month before Lehman
Brothers failed. That also helped bring down the number of jobless workers per opening to 4.1, which, while still historically high, is far better than its peak of 6.9 unemployed workers per opening in July 2009.

Continued competition among unemployed workers implies that wage inflation is unlikely to hit anytime soon, according to Henry Mo, vice president of economics at Credit Suisse.

The main continued area of concern in the Labor Department’s report was the disconnect between job openings and hiring. There has been decent growth in the number of job openings since the recession officially began, with openings up 38 percent since June 2009, but growth in the number of hiring has been very slow, up only 17 percent.

It’s not clear what to make of this. The disconnect could be due to a skills mismatch — that is, workers don’t have the skills that employers are looking for. Or it could just be a sign of continued hesitation among employers, who are waiting for the recovery to pick up more speed before they commit to filling an opening.

The Lasting Financial Impact of a Layoff

Losing a job you wanted to keep is never a good thing. But for those who lost their jobs during the Great Recession, the long-term consequences will probably be very significant.

According to an economic analysis by the Hamilton Project, a research group in Washington, those laid off from long-term jobs between 2007 and 2009 are likely to lose a total of $774 billion in earnings over the next 25 years, even if they get new jobs.

The analysis of Census Bureau data, conducted by Michael Greenstone and Adam Looney, looks at how the seven million workers who lost jobs they had held for three years or more at the time of the layoff fared in the two years following the job loss.

The graph below shows all workers who lost their job for economic reasons during the worst seven months of the recession and how they have fared since the job loss.

Including those who have not yet found work as well as those who did find new jobs, the average earnings of the group were barely half what they were before the workers lost their jobs, falling from $43,700 before to $23,000 two years later. The income numbers do not include unemployment benefits.

Focusing just on those who were able to find new jobs, the study found they were earning an average of 17 percent less than they earned in their previous posts.

Mr. Greenstone and Mr. Looney based their calculations of future losses on research conducted by Steven J. Davis, an economist at the Booth School of Business at the University of Chicago, and Till von Wachter, an economist at Columbia University, which found that workers who lose their jobs during recessions lose an average of $112,100 over their careers.

Mr. Greenstone, an economist at the Massachusetts Institute of Technology, said many of the displaced workers either have no college degrees or have skills that are rapidly being outdated, and therefore need education to get back to work in jobs that will match their prior incomes. The sobering data, he said, “highlights the importance of trying to identify training programs that can help this set of workers so they don’t lose that money.”

This post has been revised to reflect the following correction:

Correction: November 4, 2011

An earlier version of this post misstated the period examined in arriving at an estimate that laid-off workers are likely to lose a total of $774 billion in earnings over the next 25 years. It involves those laid off from 2007 to 2009, not between October 2008 and April 2009.

Misrepresentations, Regulations and Jobs

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.

Republicans have a problem. People are increasingly concerned about unemployment, but Republicans have nothing to offer them. The G.O.P. opposes additional government spending for jobs programs and, in fact, favors big cuts in spending that would be likely to lead to further layoffs at all levels of government.

Today’s Economist

Perspectives from expert contributors.

Republicans favor tax cuts for the wealthy and corporations, but these had no stimulative effect during the George W. Bush administration and there is no reason to believe that more of them will have any today. And the Republicans’ oft-stated concern for the deficit makes tax cuts a hard sell.

Perspectives from expert contributors.

These constraints have led Republicans to embrace the idea that government regulation is the principal factor holding back employment. They assert that Barack Obama has unleashed a tidal wave of new regulations, which has created uncertainty among businesses and prevents them from investing and hiring.

No hard evidence is offered for this claim; it is simply asserted as self-evident and repeated endlessly throughout the conservative echo chamber.

On Aug. 29, the House majority leader, Eric Cantor of Virginia, sent a memorandum to members of the House Republican Conference, telling them to make the repeal of job-destroying regulations the key point in the Republican jobs agenda.

“By pursuing a steady repeal of job-destroying regulations, we can help lift the cloud of uncertainty hanging over small and large employers alike, empowering them to hire more workers,” Mr. Cantor said.

Evidence supporting Mr. Cantor’s contention that deregulation would increase unemployment is very weak. For some years, the Bureau of Labor Statistics has had a program that tracks mass layoffs. In 2007, the program was expanded, and businesses were asked their reasons for laying off workers. Among the reasons offered was “government regulations/intervention.” There is only partial data for 2007, but we have data since then through the second quarter of this year.

The table below presents the bureau’s data. As one can see, the number of layoffs nationwide caused by government regulation is minuscule and shows no evidence of getting worse during the Obama administration. Lack of demand for business products and services is vastly more important.

These results are supported by surveys. During June and July, Small Business Majority asked 1,257 small-business owners to name the two biggest problems they face. Only 13 percent listed government regulation as one of them. Almost half said their biggest problem was uncertainty about the future course of the economy — another way of saying a lack of customers and sales.

The Wall Street Journal’s July survey of business economists found, “The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists.”

In August, McClatchy Newspapers canvassed small businesses, asking them if regulation was a big problem. It could find no evidence that this was the case.

“None of the business owners complained about regulation in their particular industries, and most seemed to welcome it,” McClatchy reported. “Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-9 and its grim aftermath.”

The latest monthly survey of its members by the National Federation of Independent Business shows that poor sales are far and away their biggest problem. While concerns about regulation have risen during the Obama administration, they are about the same now as they were during Ronald Reagan’s administration, according to an analysis of the federation’s data by the Economic Policy Institute.

Academic research has also failed to find evidence that regulation is a significant factor in unemployment. In a blog post on Sept. 5, Jay Livingston, a sociologist at Montclair State University, hypothesized that if regulation were a major problem it would show up in the unemployment rates of industries where regulation has been increasing: the financial sector, medical care and mining/fuel extraction. He found that unemployment rates in these sectors were actually well below the national average. Unemployment is much higher in those industries that one would expect to suffer most from a lack of aggregate demand: construction, leisure and hospitality, business services, wholesale and retail trade, and durable goods.

Gary Burtless, an economist at the Brookings Institution, asserts that if businesses were really concerned about rising regulations, they would be investing now to avoid them. But there is no indication that this is the case. “The real reason for anemic investment and hiring is that businesses are not confident there will be enough potential customers to justify expansion or even routine capital replacement right now,” he says.

In my opinion, regulatory uncertainty is a canard invented by Republicans that allows them to use current economic problems to pursue an agenda supported by the business community year in and year out. In other words, it is a simple case of political opportunism, not a serious effort to deal with high unemployment.

Job Insecurity Remains High

For the last couple of years, the problem plaguing the job market was that companies have been in a holding pattern: Companies weren’t laying off workers in high numbers. But if you were already laid off, finding a company willing to expand was impossible.

CATHERINE RAMPELL

Dollars to doughnuts.

Even so, workers still employed remain anxious about their job security, according to new survey data from Gallup.

Dollars to doughnuts.

A USA Today/Gallup Poll conducted in mid-August, based on a survey of 489 adults employed full or part time, found that 30 percent said they were worried about being laid off, similar to the 31 percent who answered this way in August 2009.

The survey also found that workers were concerned that their hours, wages and benefits would be cut back. Benefit cuts were the most common worry, with 44 percent of workers surveyed saying they thought benefits might be on the chopping block.

Lower-income workers were especially likely to be concerned about their job security:

As you can see, workers in households earning less than $50,000 annually were about twice as likely as their counterparts in households making at least $75,000 to be concerned about layoffs, shorter workweeks and off-shoring.

Maybe the anxiety is unfounded, and companies are not planning layoffs at any increased pace. But such worries can become self-fulfilling if workers start cutting back in preparation for potential job losses. If they cut back their spending, companies don’t sell as much and then starting paring down their own staffs.