Unemployment Picture Remains Bleak as Firms Cut Spending

October 29, 2009 Updated: October 1, 2015

Sen. Tom Harkin talks about extending unemployment benefits during a news conference with fellow Senate Democrats at the U.S. Capitol October 20, 2009 in Washington, DC. (Chip Somodevilla/Getty Images)
Sen. Tom Harkin talks about extending unemployment benefits during a news conference with fellow Senate Democrats at the U.S. Capitol October 20, 2009 in Washington, DC. (Chip Somodevilla/Getty Images)
U.S. consumers have been hit by waves of layoffs since year 2008, and facing limited job openings and companies’ continued reluctance to hire, experts don’t expect the trend to reverse in the near future.

“As of last month, 15 million unemployed Americans began competing for three million available jobs,” Senate Finance Committee Chairman Max Baucus said in a press release.

At least eight bills have been introduced to extend unemployment benefits. At least five are dead and one has passed the house, albeit limited in scope. The bill only applies to states with an unemployment rate of 8.5 percent or more.

Sen. Jeanne Shaheen, D-N.H., introduced a bill, supported by Majority Leader Harry Reid among others, that would extend unemployment insurance for another 14 weeks irrespective of the state or the rate of unemployment.

“People who have spent their whole lives working hard are struggling to find jobs amidst the worst economic crisis since the Great Depression. Helping these families stay afloat is not a partisan issue. It is an urgent national issue that demands action now,” Sen. Jack Reed, D-R.I., said in a statement.
Taking Toll on U.S. Economy

The western United States leads the nation with a 10.6 percent unemployment rate, which is followed by the Midwest with a 9.8 percent jobless rate as of the end of September, painting a dismal picture for the upcoming holiday shopping season, according to the most recent unemployment numbers released by the Bureau of Labor Statistics (BLS) in late October.

The only time Americans were faced with this difficult of a job market was 28 years ago when the unemployment rate hit 10.8 percent. It remained high until 1987, when the jobless rate dipped to between 5 and 6 percent. The lowest unemployment was experienced in April 2000 with a rate of 3.8 percent.

The good news is that most U.S. states reported no significant increase in unemployment in September over August, with the exception of Illinois, where unemployment rose by 0.5 percent.

Companies in New York are still laying off more people than hiring, while in Indiana, companies reported a net hiring of 4,400 people, followed by New Mexico with 3,700, and Nevada with 2,700.

The Los Angeles School District pushed about 2,100 teachers out the door over the past few months. Some are being called back as substitutes instead of full-time teachers, reducing opportunities for substitute teachers, through a rather complex arrangement and agreement with the teachers union.

Eli Lilly and Co., a global pharmaceutical firm, intends to reduce its staff by 35,000 people over the next two years. The Wall Street Journal Health blog recently reported that Eli Lilly actually hired more workers in 2009 by 350 people. The disconcerting news is that this company is hiring in China and other markets, while reducing its workforce in the United States.

Even the health care sector—where growth continues due to the demand for health services and patient care—is planning layoffs to reduce costs. The Cook County Health and Hospitals System in Illinois sent pink slips to 335 people and will not fill 700 open positions, all in an effort to save $60 million.

The Chicago Transit Authority (CTA) announced that it will furlough 100 nonunion and 1,000 union workers to cut costs, subject to approval by the Chicago Transit Board, according to an October announcement.

Verizon Communications, which owns the nation’s largest wireless network, is rumored to cut over 16,000 positions over the next two years, according to the Broadband Web site. The company announced during its second-quarter earnings conference call that it would cut 8,000 people by the end of 2009.

Cost Cutting Above All Else

In recessionary times, some companies often throw prudent business practices to the wind and ignore established law and mandatory legal notice as required under the WARN Act (Worker Adjustment and Retraining Notification Act) during mass layoffs.

Under the WARN Act, any company with 100 or more employees must serve at least 60 days written notice before implementing a mass layoff or shutting down the company. Employees with less then six months or fewer than 20 hours may not be included in the employee count.

Foxtons Inc. of New Jersey recently settled a class action lawsuit for $475,000, filed by the law firm Krenkel & Krenkel LLC a few months ago, due to a violation of the act.

Close to 1,000 former workers of Taylor, Bean & Whitaker Mortgage Corp. filed a class-action lawsuit for violation of the WARN Act because of being pushed out the door a few months ago.

Analyzing Unemployment Trends

“Laid off workers in their 40s and 50s are finding that the skills they have built up over many years are not as much in demand as they once were,” Matthew Freedman, professor at Cornell University, said in a Knowledge @ Wharton report.

Freedman suggests that for those in that age group the chances of finding a job will be “fairly bleak, even once the economy starts to pick up again.”

However, Lynn Reaser, vice president at the National Association for Business Economics, does not agree with Freedman’s assessment regarding the prospects of those 45 and over.

“There are many jobs out there, and companies know that mid and senior level managers do bring a tremendous amount of experience and insight to the table,” Reaser said in the KW report.

The experts suggest that finding employment is not that difficult if one is willing to take a hefty 30 to 50 percent reduction in salary. Also, networking is of utmost importance in the job search.

“Some 60% of the available jobs will not be posted on job search sites or other avenues, and most of the other ones will come through making connections with schoolmates, work mates, people in clubs, religious organizations and so forth,” Reaser said.

Third-quarter BLS statistics indicate that the unemployment rate for those over 35 years is 7.6 percent versus 4.6 percent at the same time in 2008. The average rate for those over 45 years is 6.6 percent versus an average rate of 3.8 percent in 2008.

The professors suggest that people over 45 years of age may have a difficult time competing with the younger generation who grew up with and were educated in newer technologies.