Late-2002 Hiring Strong, but Cuts Kept U.S. Job Total Flat
Late-2002 Hiring Strong, but Cuts Kept U.S. Job Total Flat
3/10/2003 13:09
U.S. businesses were hiring millions of new workers late last year, but that did nothing to improve the nation's overall job market because they were also firing about the same number, according to a new Labor Department report released this week.

During the 2001 recession, by contrast, job creation plummeted at the same time job elimination spiked upward, causing a sharp drop in employment -- the reverse of what happened during the boom of the late 1990s, when employment soared, the report shows.

The department has long reported the monthly changes in the number of payroll jobs nationally, based on a survey of businesses. That survey shows that the economy has shed jobs every month since January, including 93,000 in August; today the department releases the figure for September.

The new Business Employment Dynamics report shows how much churning goes on within the job market by providing the large total numbers of jobs that appear and disappear each quarter over many years as businesses are launched or expand, while others contract or die.

The new report includes figures only through the end of last year, however, and so does not indicate whether the trends shown have continued into this year.

It shows that the 70,000 jobs lost from September to December of last year were the net result of 7.746 million job additions and 7.816 million job cuts.

These total, or gross, job gains and losses represented a significant share of the roughly 130 million total payroll jobs of that period. The job gains equaled about 7.2 percent of total private-sector employment, while the job losses were slightly larger at 7.3 percent. That means that nearly 15 percent of all payroll jobs were reallocated among firms over just a three-month period, belying the impressions that some people may have that businesses had stopped hiring or that layoffs had subsided.

The level of gross hirings and firings rose during the past decade as the size of the labor force and total payroll employment rose steadily. The pace of gross job creation began to decline and the rate of gross job loss began to rise before the recession began in March 2001. For more than a year after the recession began, gross job loss substantially exceeded gross job gain. In the second half of last year, the two nearly matched.

Because the levels of hiring and firing remained nearly the same, the pool of unemployed workers created by the high job losses during the recession is not diminishing.

"The four quarters of data for 2002 indicate that gross job losses declined and gross job gains did not return to their pre-recession levels," the Business Employment Dynamics release said.

What is unique about the period since the end of the 2001 recession is that as the economy has grown, firms have found ways to boost output without collectively having to hire more workers. The result has been outsized gains in productivity -- the amount of goods and services produced for each hour worked -- which have generated higher profits and let many employers boost pay and benefits without raising prices.

Most of the job loss or gain in the fourth quarter of last year occurred at establishments that were in business in September 2002 and still operating in December. But the report said that 1.632 million jobs were added during that three-month period because of the opening of new establishments, while 1.627 million were lost as establishments were shut down.

The results were also nearly balanced in terms of the number of locations at which jobs were lost or gained. In the fourth quarter of last year, 1.453 million establishments expanded their payrolls and 345,000 hired workers as they began operations. On the other hand, 1.476 million establishments shed workers and 333,000 shut down.

"The new data illustrate substantial job churn in the US economy," economists Ed McKelvey and Andrew Tilton of Goldman Sachs in New York told their firm's clients. "In every three-month period of the last decade, more than 7 million new jobs were created, and almost as many lost. The rate of new job creation increased steadily throughout the 1990s, peaking at over 9 million in the fourth quarter of 1999 -- of which 2 million were from new businesses."

Data for the new report are drawn from the quarterly federal unemployment insurance tax returns filed by businesses that account for about 98 percent of total payroll jobs. The monthly payroll figures, such as those due today, differ from the new report in several ways. The latter are based on a sample of business establishments and include coverage of those that are not required to file the unemployment insurance tax returns. The new report excludes government workers but both exclude agricultural workers.

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