Thursday, March 3, 2011

Layoffs are declining rapidly, new hiring to follow

Weekly claims have been "unexpectedly" strong (i.e., low) for quite some time now, and they just keep driving. The improvement is impressive. As with the Challenger tally of corporate layoffs, the story is simple: businesses have done most of the cost-cutting they are going to do. They are lean and mean, and ready to hire. And it's almost certain that they will be hiring in increasing numbers, because there are multiple signs that consumers are recovering their confidence, businesses are recovering their confidence, and financial markets have healed.

There are still just over 8 million people receiving unemployment insurance, however. This represents an army of workers available for hire—an army that has been sitting idle for the past two years. Generous and repeated extensions of the eligibility period for receiving unemployment compensation have likely slowed the reabsorption of a goodly portion of these people into the workforce, since it lets them hold out for the perfect job rather than taking whatever is available or learning some new skill or trade. This is not going to change dramatically any time soon, but I suspect that if anything does change soon, it will be employers who decide to step up their hiring efforts in order to meet rising demand. We should be seeing a significant pickup in new hirings before too long.

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