The article “Recent Layoffs in a Fragile Labor Market” by Rob Valletta and Katherine Kuang discusses the alarming indications of the labor market weakening, which might be a sign of the beginning of the new economic slow-down. Authors’ conclusions are based on the increase of the claims for unemployment insurance, which usually signal a rise in unemployment due to employers’ pessimistic predictions of the future. The pattern of unemployment boost can be also observed from the results of the Current Population Survey (CPS), and Job Openings and Labor Turnover Survey (JOLTS). Moreover, the split between state/ local government sector and private-sector employees indicated that the majority of the layoffs were conducted by the private employers, rather than by the state or local governments. Although similar patterns have been observed after previous economic recessions, the current situation does not show any signs of progress, since the temporary improvement in mid-summer was followed by a new decline in September.
The situation in the labour market is indeed quite alarming, as it might be the first sign of the so called “double dip”, or the reoccurrence of the economic recession. Although unemployment agencies are trying to stabilize the situation by unemployment benefits, labour market instability might trigger economic downturn in the nearest future. While the number of layoffs alone cannot be indicative of the upcoming crisis, the labour market statistics should not be ignored. Firstly, it is crucial to observe the behaviour of the market in the future in order to establish whether unemployment is decreasing stably, or whether the spring-fall decline indicates seasonality of the market. Moreover, the underlying reasons should be thoroughly analysed in order to understand if the employers are pessimistic about their business, or if the layoffs reflect market restructuring on the way to recovery. Lastly, it is important to combine unemployment insurance programs with retraining and unemployement assistance, in order to match the skills of the workers to the new market conditions, thus achieving efficiency and higher employment.
