Economic Research and Data

Economic Trends

Filling you in on the current state of the economy

02.23.07

Economic Activity

Extended Mass Layoffs

When 50 or more new claims for unemployment benefits are received from one establishment in a given month, government statisticians call it a mass layoff. If the layoff lasts more than 31 days, it is designated an extended mass layoff. There were 1,444 such layoffs in the fourth quarter of 2006, according to preliminary estimates from the Department of Labor’s Bureau of Labor Statistics, and they caused the separation of 255,886 workers from their jobs. These numbers indicate a slight increase over the fourth quarter of 2005. Among those employers who reported extended layoffs, 57 percent indicated that they were expecting to recall some of the workers. This was the lowest proportion for any fourth quarter since 2002.

The distribution of extended layoffs by the size of the layoff shows an interesting picture, too. A mere 1.8 percent of the layoffs caused almost 20 percent of the separations that occurred in the fourth quarter of 2006; such layoffs were of course large, each involving more than 1000 separations. On the other hand, many more mass layoffs (42.5 percent) involved fewer workers (50-99); however, these smaller mass layoffs accounted for only 16.8 percent of the total number of worker separations occurring during the quarter.

Layoff Activity by Size of Layoff
(October-December 2006)

Size of layoff Layoffs Separations
  Number Percent Number Percent
50-99 614 42.5 43,022 16.8
100-149 340 23.5 39,961 15.6
150-199 158 10.9 26,022 10.2
200-299 193 13.4 44,162 17.3
300-499 80 5.5 28,872 11.3
500-999 33 2.3 22,826 8.9
1000 or more 26 1.8 51,021 19.9 19.9
Total 1444 100 255,886 100

*Data for the third and fourth quarters of 2006 are preliminary.
Source: Department of Labor, Bureau of Labor Statistics.

Extended mass layoffs constitute a major source of job separations, especially during recessions, when the need for major employment adjustment is widespread. For instance, both extended mass layoffs and resulting separations peaked in 2001, in the midst of the most recent recession.

However, extended layoffs are not an atypical feature of a healthy economy. The completion of seasonal work caused 42 percent of the extended layoffs in the fourth quarter of 2006, generating 45 percent of separations. Contract completion follows seasonal work as a major reason for extended mass layoffs. These two factors, on average, have accounted for 44 percent of extended mass layoffs and 43 percent of separations annually since 2000. Deviations from this pattern do occur, as in 2001, when poor economic conditions forced businesses to initiate mass layoffs, and the fraction of extended mass layoffs accounted for by the completion of seasonal work and contracts declined to 27 percent.

The geographical distribution of extended mass layoffs shows that nearly a third of them (31.8 percent) have occurred in the Midwest since 2000, causing 31.6 percent of the separations that have resulted from such events. The Midwest separations were also responsible for 32 percent of all the U.S. unemployment claims that have been initiated on account of extended mass layoffs. (Initiating a claim has a very specific meaning at the Bureau of Labor Statistics: A person who files any notice of unemployment to initiate a request either for a determination of entitlement to and eligibility for compensation, or for a subsequent period of unemployment within a benefit year or period of eligibility is defined as Initial claimant.)

Regional Shares of Extended Mass Layoffs

  Annual average 2000-2006 (percent)
  Total layoffs Separations Initial claims
Northeast
19.8
18.0
21.1
South
24.3
23.1
23.6
Midwest
31.8
31.6
32.0
West
24.1
27.2
23.3

*Data for third and fourth quarters of 2006 are preliminary.
Source: Department of Labor, Bureau of Labor Statistics.

Economic Trends is published by the Research Department of the Federal Reserve Bank of Cleveland. Views stated in Economic Trends are those of individuals in the Research Department and not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System.




Economic Trends is published by the Research Department of the Federal Reserve Bank of Cleveland.

Views stated in Economic Trends are those of individuals in the Research Department and not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System. Materials may be reprinted provided that the source is credited.

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