Data Show Growing Trend Toward Permanent Layoffs
Permanent layoffs surged from 1999 through 2001, the Bureau of Labor Statistics reported yesterday in releasing the results of a survey that is the government's most comprehensive assessment of how frequently workers are dismissed from their jobs.

The 9.9 million people who lost their jobs in that three-year period represented an unusually high 7.8 percent of the nation's work force. The economy moved from boom in 1999 to recession in 2001, and half of the layoffs came in that last hard year, when the unemployment rate suddenly shot up.

Compounding the damage from the surge in layoffs, employers cut back on hiring. More than 800,000 job openings disappeared from May of last year to May of this year, a decline of nearly 19 percent, the bureau reported last month.

"You can have a high job displacement rate in a dynamic economy when there are lots of job openings for people to go to," said Lawrence Katz, a Harvard University labor economist. "But now there is a lot of displacement with a low level of job openings," and that is hardship.

Even in 1999 and 2000, which were years of strong growth and unemployment rates at 25-year lows, permanent layoffs were sufficiently frequent and widespread to suggest to many economists that the practice had become entrenched in the American workplace in the best as well as the worst of times.

"These numbers show a relatively high level of job displacement even when the unemployment rate was very low," said Ryan Helwig, the economist at the Bureau of Labor Statistics who wrote the latest job displacement report. It is based on a survey every two years of 60,000 households.

The new report confirmed trends that have been developing for more than a decade. Permanent layoffs, also known as downsizing, no longer dip as sharply in the expansion periods between recessions. In addition, their constant presence has generated job insecurity, many economists say. That insecurity, in turn, has damped wage demands.

In fending off pressure to increase interest rates in the late 1990's, for example, Alan Greenspan, the chairman of the Federal Reserve, cited job insecurity as a reason the falling unemployment rate would not produce the inflationary wage pressures characteristic of tight labor markets in the 1970's and 1980's. His resistance to rate increases, in turn, helped to sustain the expansion. The low rates encouraged borrowing to finance spending.

Among the 9.9 million people who said in the latest survey, conducted in January, that they had lost a job in the previous three years, 64.4 percent were working again at the time of the survey, in most cases full time. An additional 22 percent were unemployed and seeking work, while 14 percent had dropped out of the labor force.

The 64.4 percent re-employment rate was significantly below the rate in the three previous surveys. It matched, in fact, the difficulty in landing another job during the early 1990's recession, when the unemployment rate rose above 7 percent. It is 5.9 percent now, up from 4.3 percent early last year.

Those who managed to land full-time jobs after having been laid off from 1999 through 2001 did so at a sacrifice. Their median weekly wage in their new job was $571, down from $609 in the lost jobs.
http://www.nytimes.com/2002/08/22/business/22ECON.html