The roll call of businesses announcing job cuts is continuing along its grim path, now set to enter its second year. Over the past 11 months, almost 2 million have seen their paychecks dry up. The lion’s share of these losses has happened just in the past three months, with more than 500,000 in November alone. While the pink slips have been passed out mainly in larger companies, many smaller businesses have also slashed their payrolls, and it appears that the difficulties will continue for some time.
As a result, workers in many states are not only facing a loss of income, but also future challenges with pensions, health care, and other services. In addition, there are fears among most of those with jobs that if the labor market continues to deteriorate, salary levels could be bid down with so many out of work.
The November employment loss of 533,000, the largest monthly decrease since the December 1974 drop of 602,000, saw shrinkage in practically every part of the economy from factories to retailers. While construction and manufacturing continued to suffer severe losses, the vast majority of the layoffs (370,000) were in services-related sectors (not overly surprising since these industries account for upwards of 85% of the US economy). Only education, health care, and government were spared.
While some states are experiencing greater job losses than others, the employment drain continues to widen. In August, just 18 states reported monthly losses, but by September, the number had risen to 41, along with the District of Columbia.
It should be noted that even in boom times, job losses are inevitable as new technology eliminates some positions and creates others. From 1993 to 2002, there were some 327.7 million private-sector jobs created while various changes forced the elimination of approximately 309.9 million. The goal, of course, is to have a greater number of net new workers while assuring that those displaced have reasonable access to emerging opportunities. Today, the dramatic job losses are exceeding new employment opportunities, and job openings have been trending downward for about a year.
Although the job market has always been a major factor in assessing the health of the nation’s economy, the current slide is fast emerging as a generator of economic distress, because the loss of employment impacts so many other areas of our lives.
Some 7-10% of mortgage holders are at least one month behind in payment and up to 3% are in foreclosure proceedings, though government actions may delay this process in some cases. Moreover, housing prices are still falling in most parts of the country, particularly in California and Florida, which also have been hit hard by unemployment.
Industrial production, which is a vital factor in the overall output of the nation’s economy, has been highly volatile over the past year. Recently, it has been showing signs of stress typical of a recession and suffering a decline.
The economic difficulties we are experiencing are prompting a plethora of suggested solutions including stimulus packages, government workforce activities, and a reduction of the Federal Reserve short-term interest rate target. None of these band-aids are expected to be the end-all which will immediately lift our economy out of the doldrums, but each of them will probably have some positive effect.
Although the Lone Star State has been fortunate during this dramatic downturn due to its relatively healthy economy, as the national situation continues to plummet, it is likely that Texas could experience some slowing. In fact, we are already seeing tell-tale signs. Even so, the state should dodge the worst of the problems and lead the way into recovery.