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Layoffs Tumble - June 1, 2021

Layoffs are not just a measure of the labor market. The level and direction of layoffs is an important indicator of the health of the U.S. economy. 

A review of downsizings could be viewed as a ‘hard’ measure of business confidence. It isn’t simply an opinion. It’s a decision backed by money.

If business is slowing, we’d expect the level of layoffs to rise. If activity is accelerating, we’d expect layoffs to decline.

One measurement of layoffs that analysts review is weekly first-time claims for unemployment benefits.

Every Thursday, the Department of Labor reports on first-time claims. Layoffs soared to a record level when the economy went into lockdown a year ago.

Layoffs also accelerated late last year, when Covid cases jumped and restrictions on various businesses increased.

Lately, however, the number of weekly layoffs has plummeted.

In the 2007-09 recession, it took 2 years for first-time claims to approach 400,000 from the 2009 peak. Today, it has taken less than 2 months to cover the same territory.

There is plenty of cash in bank accounts, consumers and businesses are spending and driving economic activity, and, not surprisingly, businesses are growing increasingly reluctant to let workers go.

Improvement is unlikely to continue to occur in a straight line, but the falling number of layoffs is one of many signs that the economy is improving at a quick pace as we enter the summer months.

@LWMLLC