1,444 mass layoffs created 256K job separations in 4Q

In the fourth quarter of 2006, there were 1,444 mass layoff events that resulted in the separation of 255,886 workers from their jobs for at least 31 days, according to preliminary figures released February 13 by the U.S. Department of Labor’s Bureau of Labor Statistics. Both the total number of layoff events and the number of separations were higher than during the October-December 2005 time period. The over-the-year increases in layoffs were most notable in transportation equipment manufacturing, insurance carriers and related activities, and food and beverage stores.

 

Fifty-seven percent of all employers reporting an extended layoff in the fourth quarter of 2006 indicated they would recall some number of workers. This was the lowest proportion of employers expecting to recall workers for any fourth quarter since 2002. Extended mass layoffs that involve the movement of work within the same company or to a different company, either domestically or outside the U.S., occurred in 7 percent of the non--seasonal layoff events, accounting for 10 percent of worker separations related to non-seasonal events.

 

The completion of seasonal work accounted for 42 percent of all events and resulted in 114,978 separations during the period – the lowest level of private non-farm seasonal separations for any fourth quarter since 1999. Layoffs due to internal company restructuring (bankruptcy, business ownership change, financial difficulty, and reorganization) represented 13 percent of events and resulted in 45,954 separations; a year earlier, separations totaled 33,251. Permanent closure of worksites occurred in 10 percent of all events and affected 40,391 workers, the highest number of separations due to permanent closures for any fourth quarter since 2002.

 

In the fourth quarter of 2006, the national unemployment rate was 4.2 percent, not seasonally adjusted; a year earlier it was 4.7 percent. Private non-farm payroll employment, not seasonally adjusted, increased by 1.8 percent, or about 2 million jobs, from the October-December 2005 period to the October-December 2006 period.

 

For all of 2006, the total number of extended mass layoff events was 4,689, and the total number of worker separations was 894,739. While the annual total of layoff events was lower in 2006 than in 2005, the number of separations was slightly higher.

 

Industry Distribution of Extended Layoffs
In the fourth quarter of 2006, extended mass layoff separations occurred in 351 of the 1,105 detailed industries for which data are available. Manufacturing industries accounted for 29 percent of private non-farm layoff events and 32 percent of separations during October-December 2006. The proportion of manufacturing events and separations were slightly higher when compared with fourth quarter 2005. In the fourth quarter of 2006, the highest number of separations in the manufacturing sector was in transportation equipment manufacturing (22,040, mostly associated with motor vehicles). The next highest number of separations was in food manufacturing (16,827).

 

The construction sector had 36 percent of the extended layoff events and 25 percent of the separations, mostly in heavy and civil engineering construction and in specialty trade contractors. Layoffs in the administrative and waste services sector comprised 10 percent of events and 9 percent of separations, mostly in landscaping services and in temporary help services. Retail trade accounted for 5 percent of private non-farm layoff events and 9 percent of separations, primarily in non-store retailers. Cut-backs in the accommodation and food services industry accounted for 4 percent of events and 7 percent of separations and were concentrated in hotels and motels, except casino hotels.

 

Information technology-producing industries (communications equipment, communications services, computer hardware, and software and computer services) accounted for 2 percent of layoff events and 6,437 worker separations in the fourth quarter of 2006. A year earlier, these industries accounted for 3 percent of layoff events and 7,222 separations. Layoffs in the information technology-producing industries in the fourth quarter of 2006 were most numerous in computer hardware, with 3,703 separations, followed by communications equipment, with 1,467 separations.

 

Reasons for Extended Layoff
Layoffs due to the completion of seasonal work accounted for 42 percent of the extended layoff events and resulted in 114,978 separations in the fourth quarter of 2006. Seasonal layoffs were most numerous among workers in heavy and civil engineering construction (highway, street and bridge construction) and in food manufacturing (fruit and vegetable canning).

 

Contract completion accounted for 20 percent of events and resulted in 34,880 separations during the fourth quarter. These layoffs were primarily in administrative and support services, followed by specialty trade contractors.

 

Internal company restructuring (due to bankruptcy, business ownership change, financial difficulty, and reorganization) accounted for 13 percent of layoff events and resulted in 45,954 separations. These layoffs were mostly among workers in food and beverage stores, transportation equipment manufacturing, and insurance carriers and related activities. Over half of both the internal company restructuring layoff events and separations were due to reorganization within the company.

 

Movement of Work
Between October and December of 2006, 59 extended mass layoff events involved the movement of work; this was about 7 percent of total extended mass layoff events, excluding those for seasonal and vacation reasons. These movements of work were to other U.S. locations or to locations outside of the U.S., and they occurred either within the same company or to other companies. The extended mass layoff events involving movement of work were associated with the separation of 14,197 workers, about 10 percent of all separations resulting from non-seasonal/non-vacation mass layoff events. A year earlier, there were 65 layoff events and 12,051 separations associated with the movement of work.

 

Among the 59 extended mass layoff events with reported relocation of work, just over two-thirds (68 percent) were permanent closures of worksites, which affected 10,029 workers. In comparison, 10 percent of the total extended mass layoff events reported for the fourth quarter of 2006 involved the permanent closure of worksites. Of the layoffs involving the movement of work, 71 percent of the events and 81 percent of the laid-off workers were from manufacturing industries during the fourth quarter. Among all private non-farm extended layoffs, manufacturing accounted for 29 percent of the events and 32 percent of separations.

 

Internal company restructuring (bankruptcy, business ownership change, financial difficulty and reorganization) accounted for 73 percent of layoff events associated with work relocation and resulted in 8,759 separations during the fourth quarter. Most of these were due to reorganization within the company. Thirteen percent of the extended mass layoff events in the total private non-farm economy were due to internal company restructuring.

 

Among the regions, the Midwest accounted for the largest proportion of workers affected by extended mass layoffs associated with the movement of work (37 percent), followed by the South (35 percent), the West (18 percent) and the Northeast (10 percent).

 

Some extended mass layoff events involve more than one relocation of work action. For example, an extended mass layoff event at an establishment may involve job loss due to movement of work to both another domestic location of the company and a location out of the country. This would be counted as two movement of work actions. The 59 extended layoff events with movement of work for the fourth quarter of 2006 involved 79 identifiable relocations of work. An identifiable relocation of work occurs when the employer provides sufficient information on the new location of work and/or the number of workers affected by the movement. Of the 79 relocations, employers were able to provide information on the specific number of separations associated with the movement of work component of the layoff in 61 actions involving 9,692 workers. Thus, a range of 9,692 (separations in movement of work actions where the employer was able to provide specific detail) to 14,197 (total separations in all layoff events that included movement of work) is established for separations due to the movement of work in the fourth quarter.

 

In the 61 actions where employers were able to provide more complete separations information, 89 percent of relocations (54 out of 61) occurred among establishments within the same company. In 59 percent of these relocations (32 out of 54), the work activities were reassigned to places elsewhere in the U.S.

 

Forty-one percent of the movement-of-work relocations involved outof-country moves (25 out of 61). The separation of 5,281 workers was associated with out-of-country relocations, 4 percent of all non-seasonal/non-vacation extended mass layoff separations. Domestic relocation of work – both within the company and to other companies – affected 4,411 workers.

 

Recall Expectations
Fifty-seven percent of employers reporting an extended layoff in the fourth quarter of 2006 indicated they anticipated some type of recall. This compares with 69 percent of the employers anticipating a recall a year earlier and is the lowest such proportion for the fourth quarter since 2002. The fourth quarter typically has the highest recall expectations for any quarter of the year.

 

Among establishments expecting a recall, most employers expected to recall over one-half of the separated employees and to do so within six months. Fifty-three percent of the employers expected to extend the offer to all laid-off workers.

 

Excluding layoff events due to seasonal work and vacation period (in which 96 percent of the employers expected a recall), employers expected to recall laid-off workers in 27 percent of the events. A year earlier, 34 percent of employers expected a recall in non-seasonal and non-vacation events. In layoff events due to internal company restructuring, employers anticipated a recall in only 4 percent of the events.

 

Size of Extended Layoff
Layoff events during the fourth quarter continued to be concentrated at the lower end of the extended layoff-size spectrum, with 66 percent involving fewer than 150 workers. These events, however, accounted for only 32 percent of all separations. Separations involving 500 or more workers, while comprising 4 percent of the events, accounted for 29 percent of all separations, up from 22 percent in October-December 2005. The average size of layoffs (as measured by separations per layoff event) differed widely by industry, ranging from a low of 63 separations in motion picture and sound recordings industries to a high of 687 in non-store retailers.

 

Initial Claimant Characteristics
A total of 217,742 initial claimants for unemployment insurance were associated with extended mass layoffs in the fourth quarter of 2006. Of these claimants, 13 percent were black, 16 percent were Hispanic, 29 percent were women, 37 percent were 30 to 44 years of age, and 16 percent were 55 years of age or older. Among persons in the civilian labor force for the same period, 11 percent were black, 14 percent were Hispanic, 46 percent were women, 34 percent were age 30 to 44, and 17 percent were 55 years of age or older.

 

Geographic Distribution
In the fourth quarter, the number of separations due to extended mass layoff events was highest in the Midwest (123,454), followed by the West (64,929), the South (34,288), and the Northeast (33,215). Extended mass layoffs in the Midwest were mainly in heavy and civil engineering construction and in transportation equipment manufacturing.

 

Two of the four regions reported over-the-year increases in separations, with the largest increase occurring in the West (+24,371), followed by the Midwest (+2,782). The South had the largest over-the-year decline (-13,610) in worker separations. Three of the nine geographic divisions reported over-the-year increases in laid-off workers, with the largest increases occurring in the Pacific (+24,244) and East North Central (+12,434) divisions. The West North Central division reported the largest decrease in separations (-9,652).

 

Among the 50 states and the District of Columbia, the largest number of worker separations occurred in California (38,938), followed by Illinois (33,328), Michigan (24,403) and Ohio (22,529). These four states accounted for 46 percent of total layoff events and 47 percent of separations during the fourth quarter of 2006. Other states with high numbers of separations were Wisconsin (13,715), Minnesota (12,921), Florida (9,791) and New York (9,298). After excluding the substantial impact of seasonal work, California reported the most laid-off workers (32,774), largely due to layoffs in insurance carriers and related activities and in specialty trade contractors.

 

Over the year, California reported the greatest increase in workers laid off for all reasons during the fourth quarter (+24,658), followed by Michigan (+9,042) and Maryland (+2,180). The largest decreases occurred in New York (-8,245), Florida (-7,468) and Louisiana (-6,755).

 

Fifty-five percent of events and 57 percent of separations (144,849) occurred in metropolitan areas in the fourth quarter of 2006, compared with 57 percent of events and 54 percent of separations (135,460) during the fourth quarter of 2005. Among the 367 metropolitan areas, Chicago-Naperville-Joliet, Ill.-Ind.-Wis., reported the highest number of separations, 14,916, in the fourth quarter of 2006. Next was Detroit-Warren-Livonia, Mich., with 12,224 separations, and Los Angeles-Long Beach-Santa Ana, Calif., with 10,498 separations. Employers located in non-metropolitan areas separated 30,654 workers in mass layoffs, down from 35,066 workers in the fourth quarter of 2005.

 

Review of 2006
For all of 2006, employers reported 4,689 extended mass layoff actions, affecting 894,739 workers. Compared to 2005, the number of events was down from 4,881, but the number of separations was up from 884,661. The annual average national unemployment rate decreased from 5.1 percent in 2005 to 4.6 percent in 2006, while private non-farm payroll employment increased by 2 percent, or 2,282,000 jobs.

 

Thirteen percent of extended events in 2006 were permanent closures, accounting for 150,951 worker separations. When compared with 2005, the share of separations due to permanent closures that were associated with extended mass layoffs rose by 5 percentage points. During 2006, permanent closures were most numerous in the manufacturing sector, primarily in transportation equipment manufacturing and in food production. Reorganization within the company was most often cited as the reason for closures in manufacturing during 2006, accounting for 37 percent of the total closures in manufacturing.

 

In 2006, employers expected a recall in 52 percent of the mass layoff events, down from 56 percent of events in 2005. Employers in arts, entertainment, and recreation; health care and social assistance; and other services, except public administration were more likely to expect some type of recall than were those in other industries. The finance and insurance sector had the lowest percentage of employers with an expectation of recall (5 percent).

 

Of the layoff events where employers did not expect to recall laid-off workers, 33 percent were in the manufacturing sector. These occurred primarily in transportation equipment manufacturing and in computer and electronic products manufacturing.

 

Industry: Manufacturing had the largest share of extended events and separations in 2006. Manufacturing accounted for 28 percent of all mass layoff events and 29 percent of all separations. Separations were most numerous in transportation equipment manufacturing (77,256, mainly in motor vehicle manufacturing) and in food manufacturing (48,654, largely fresh and frozen seafood processing and fruit and vegetable canning). Compared to 2005, 11 of the 21 manufacturing subgroups had increases in the number of separations, with the largest increases occurring in transportation equipment manufacturing (+34,285) and textile mills (+3,827). Fabricated metal product manufacturing had the largest decrease (-3,309), followed by chemical manufacturing (-2,361).

 

Reason: In 2006, seasonal work continued to be the most-cited reason for layoff, accounting for 33 percent of all layoff events and 36 percent of all separations. A year earlier, seasonal layoffs accounted for 37 percent of events and 40 percent of separations. The seasonal layoffs in 2006 occurred primarily in transit and ground passenger transportation, heavy and civil engineering construction, and food services and drinking places.

 

Layoff activity due to internal company restructuring occurred largely among transportation equipment manufacturing, general merchandise stores, food and beverage stores, and credit intermediation and related services. Internal company restructuring was reported in 795 events (17 percent of the total), resulting in the separation of 195,745 workers (22 percent of the total).

 

Movement of work: In 2006, there were 242 extended mass layoff events that involved work moving within the same company or to a different company, domestically or out of the U.S. The events involving movement of work were associated with the separation of 54,166 workers, about 10 percent of all separations resulting from non-seasonal/non-vacation mass layoff events.

 

Sixty-six percent of events with movement of work involved the permanent closure of a worksite, affecting 38,827 workers. More than two-thirds of the events and separations with movement of work were in manufacturing industries, mostly in transportation equipment manufacturing and in electrical equipment and appliance manufacturing. Employers citing internal company restructuring reasons (bankruptcy, business ownership change, financial difficulty and reorganization) accounted for more than 70 percent of the movement-of-work events and separations. Among the regions, the South accounted for the largest proportion of laid-off workers associated with the movement of work (34 percent), followed by the Midwest (31 percent), the West (19 percent) and the Northeast (15 percent).

 

As part of the 242 layoff events, 334 identifiable movement-of-work actions were taken by employers. Employers were able to provide information on specific separations associated with the movement of work component of the layoff in 227 actions (out of the 334), which totaled 33,266 laid-off workers. Thus for 2006, the number of separations due to the movement of work ranged between 33,266 (separations in movement-of-work actions where the employer was able to provide specific detail) to 54,166 (total separations in all layoff events that included movement of work).

 

Of the 227 movement-of-work actions for which complete information is available, more than 6 in 10 relocations were to other locations within the U.S., and 84 percent involved moving work within the company. The separation of 13,067 workers was associated with out-of-country relocations, which accounts for 39 percent of the separations related to the movement of work and 2 percent of all separations in non-seasonal/non-vacation extended mass layoff events. In out-of-country relocations, Mexico and China were cited 62 percent of the time as the destination to which work moved. Domestic relocation of work – both within the company and to other companies – affected 20,199 workers.

 

Geographic distribution: The Midwest reported more workers affected by extended mass layoffs in 2006 than any other region, 303,937. In the Midwest, transportation equipment manufacturing had the largest number of separations, with 51,157, followed by heavy and civil engineering construction, and administrative and support services. The Northeast region continued to report the lowest annual number of separations (164,804). Compared to 2005, three of the four geographic regions reported a decrease in laid-off workers, with the largest decline in the South (-46,629). The West had the only over-the-year increase (+65,393).

 

Among the 50 states and the District of Columbia, California reported the largest number of separated workers in 2006 (159,306). After California were Illinois (86,832), Florida (71,096), Michigan (66,062), Ohio (59,252) and New York (51,181). These six states accounted for 55 percent of events and separations in 2006. California recorded the largest over-the-year increase in separations (+78,624); Louisiana had the largest over-the-year decline in the number of separations (-48,863). In 2005, layoffs related to Hurricane Katrina contributed to the large number of separations in Louisiana.

 

Fifty-six percent of layoff events and 49 percent of separations occurred in metropolitan areas in 2006, compared to 60 percent of events and 53 percent of separations in 2005. Among the 367 metropolitan areas, Los Angeles-Long Beach-Santa Ana, Calif., reported the highest number of separations, 39,547. The next highest numbers of separations were in Chicago-Naperville-Joliet, Ill.-Ind.-Wis., with 35,757, and New York-Northern New Jersey-Long Island, N.Y.-N.J.-Pa., with 32,125. Employers located in non-metropolitan areas separated 96,277 workers in mass layoffs during 2006, down from 109,757 workers in 2005.