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Layoffs yet to reach panic stage
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April 6, 2001: 2:25 p.m. ET
Economists say jobs are still available, but some fear future could be tougher
By Staff Writer Chris Isidore
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NEW YORK (CNNfn) - The months of layoffs announcements weren't enough to prepare most economists for the drop in total jobs announced Friday.
The question for both those economists and the people on the unemployment line is whether the contraction of the work force was the beginning of a difficult period for job seekers. Or is this, as some believe, the low point for the nation's employment market, and a relatively mild low point at that.
The Labor Department's latest employment report surprised almost all economists with a loss of 86,000 jobs from the nation's non-farm payroll. Most had been expecting another increase.
 The report followed on the heels of Thursday's report that new jobless claims rose to their highest level in nearly two years, along with a survey by outplacement firm Challenger Gray and Christmas that showed March was the fourth straight month with more than 100,000 announced layoffs, and that the cuts rose by nearly two-thirds from February's level to 162,867.
April has already seen some other high-profile layoff announcements from companies such as financial services provider Citigroup (C: Research, Estimates), auto parts maker Visteon Corp. (VC: Research, Estimates), and supermarket chain Supervalu Inc. (SVU: Research, Estimates).
John Challenger, CEO of the outplacement firm, said Friday he's sensed growing concern about the state of the market by job seekers.
"It hasn't fallen off the table -- people are finding jobs right now," he said. "But if you're out of a job, you don't want to wait until summer to start looking, thinking you have severance left. And I don't think they are (waiting). I'm seeing people who are really scared by the job losses, who are without the same confidence we saw last summer."
Outlook still looks rosy
But Ken Goldstein, economist with The Conference Board, the private research group that tracks both the strength of the economy and the level of consumer confidence, goes so far as to say he believes the outlook is still rather rosy.
"This is a jab, it's not a haymaker," said Goldstein. "What we see here in March is probably the end of it."
 Goldstein said numbers from the manufacturing sector suggest the bottom has been reached, and that some laid-off employees there could start being recalled soon.
And Goldstein said that members of the public surveyed by the Conference Board are generally optimistic as well, and he doesn't expect this latest report to shake that confidence about the job market.
"They got scared earlier this year by all layoff and recession talk," he said. "When we took the survey in March, they didn't say it's great, but they're saying it's not so bad. These numbers are going to knock it down a notch, but it's not going to sink that confidence unless they hear about a lot of people who can't find a job, and judging by these numbers, I don't think that's going to happen."
Sumetra Weber, a 25-year old victim of a dot.com layoff in New York, said she was optimistic about the job market, despite being unemployed.
"It actually is picking back up again," she said during a visit to the unemployment office in the New York City borough of Manhattan Friday afternoon. "I was worried a few weeks ago, but this week online I actually saw a whole bunch of other jobs, and some recruiters are calling me back. So I'm not too worried right now."
Public eyes unemployment rate
David Orr, chief economist for First Union, said that the general public probably doesn't look at any unemployment statistic other than the unemployment rate, which rose to 4.3 percent. That's probably not high enough to concern the public or even economists.
But Orr says he sees weakness in hiring spreading out of manufacturing to other key segments, such as retail. He now believes that rate could rise to 4.5 or 4.7 percent in coming months, and that would suggest trouble for job seekers and the economy, even if it seems low by historical standards.
"My belief all along is the unemployment rate is the key to consumer behavior," said Orr. "A 4.5 percent unemployment rate would be more than a half a percentage point above the low of 3.9 percent. If unemployment goes up a half percentage point from its trough, you almost always get a recession subsequently in the next 12 months. There is a snowballing effect that begins to happen once you get too much past that size increase. While it might take a nice round 5.0 percent rate before people get panicked, the snow may already be rolling over them by then."
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If unemployment goes up a half percentage point from its trough, you almost always get a recession subsequently in the next 12 months.
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David Orr
Chief economist, First Union |
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Goldstein answers that the job market is still strong enough that Friday's employment statistics show average hourly wages rising, the sign of a job market that is still fairly tight.
Bill Cheney, chief economist for John Hancock Financial Services, also sees strength in the current job market, but he thinks it's too soon to read the significance of Friday's payroll number, but it has him worried.
"Up until now, we were told by official statistics that whatever layoffs were taking place were being made up by new hiring," he said. "There was a lot of pent-up demand for labor. Either this is just a freak month or the pent-up demand has evaporated quickly, and perhaps from here on our layoffs will result in real losses.
"If you're firmly wedded to the belief nothing bad will happen, you can shrug it off, but it's definitely news and its definitely bad news," he added.
Be nice to your boss
Challenger said that people looking for jobs shouldn't be panicked by Friday's number. But he said the numbers are a reason for concern, particularly since many of the layoffs plans that have been announced haven't actually been implemented yet.
"I would be working hard if I was out of work to find a job now while the market is still hot but worsening," he said. "If you're working and there are layoffs announced at your job and they haven't come down yet, I'd be working to make sure the relationships with the people you work for are strong and in good repair. Volunteer for assignments. Make yourself indispensable." 
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