Unemployment 2009: A Change for the Better?

Our country is starting a new year. Barrack Obama is our new president. Although he cannot change things overnight, like his campaign promises stated, will this be a year for change?

At the beginning of his first term, what is our unemployment situation? The unemployment rate rose to 7.6% compared to 7.2% in December. Unfortunately, this has already surpassed some economist’s estimates. In reading an article called Mounting Layoffs: Why They’re Different This Time from October 23, 2008, Diane Swonk, a chief economist from Mesirow Financial, expected 2008’s year-end unemployment rate to be 6.5% while 2009’s year- end unemployment rate is expected to be 7.5%.

According to the Bureau of Labor Depart, nonfarm payroll dropped sharply in Early December. Payroll employment fell by another 524,000 in comparison to 533,000 in November. The number of unemployed persons increased by 632,000 to 11.1 million. Furthermore, the number of the long-term unemployed (27 weeks or more) increased to 2.6 million in December, up 1.3 million in 2008.

Although the number of mass layoffs decreased by 58 from November, in the last quarter of 2008, extended mass layoffs and separations reached a program high. A mass layoff is where at 50 employeers are laid off from the same employer. There were 3,140 mass layoffs which resulted in 508,859 separations. Separations due to business demand more than doubled over the year to 207,267, and those layoffs due specifically to slack or insufficient work demand more than tripled to 152,279. Compared to a year ago, there were 1326 more mass layoffs for the same period. Both the construction and manufacturing industries experienced record highs.

Last year, nearly 2,6 million jobs were lost, the highest yearly job loss since 1945. So far, in this new year, it doesn't seem to be slowing down. According to the Wall Street Journal, American companies already announced more than 30,000 job cuts in the first 10 days of the new year, and CNN reported on the last monday of January, 65,400 more job cuts were announced. . To see a list of over 50 companies who have laid off this year, go to:http://blogs.wsj.com/economics/2009/01/08/first-quarter-layoffs-selection-of-job-cuts-by-major-companies/.

Some companies are starting their second round of layoffs while others are offering early retirement. A U.S. December survey found that 23% of companies plan to layoff this year while more than 15% expect to freeze salaries or cut costs. However, these figures may be low because according to a survey by the Society for Human Resource Management, 60% of their respondents plan to lay off employees. According to this survey, the most likely employees to be laid off are technical/professional positions (13%), unskilled labor postions (13%), and administrative positions (11%). Conversely, the least likely to be laid off are executive positions (1%), sale’s positions (3%), and middle management positions (6%).

Robert Brusca, a chief economist at Fact and Opinion Economics predicts the recession will end after the second quarter in 2009. He thinks the recession will follow a V-shaped cyle. In the V-shaped cycle, the jobs plummet at a steep angle followed by an improvement at the same ange in the opposite direction.

Many people are hoping the economic stimulus bill will help reverse the unemployment situation. It is estimated that the bill will either save or create 3 to 4 million jobs. According to Mark Zandi, a chief economist at Moody’sEconomny.com, the bill will reduce the number of jobs lost in the next two years. He believes without the bill, 8 million jobs would be lost over the next two years with an unemployment rate peaking at 11% compared to 5 million jobs with an unemployment rate peaking at 9% with the bill.

Although the bill will certainly help the unemployed by extending unemployment benefits and raising the amount of the weekly benefits, some people think it will not improve the job situation. The Heritage Foundation believes borrowing close to a trillion dollars will not stimulate the economy but weaken it more. They believe the best way to help the economy recover is through incentives that will spur economic activity through reducing taxes.

The economic stimulus bill has been compared to the New Deal. However, unlike the New Deal, in today’s dollars, it is more than double the cost of the New Deal. Furthermore, despite the spending with the New Deal, unemployment remained above 20% until WWII. Another example of whether economic stimulus bills work is Japan. In response to a 1990 recession, Japan passed 10 stimulus bills over 8 years, yet their economy remains stagnant.

As always, the future remains to be seen. Time will tell. Until then, we will have to hope and pray for the best.