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Economy in Brief

Challenger Lay Offs Stay Elevated
by Robert Brusca June 6, 2007

The first issue to grapple with in trying to assess the Challenger report is that its data are not seasonally adjusted. At the same time it is clear that this series has seasonal patterns. To get around this we compare the data to the year before.. We also have created the accompanying chart that plots each month of the year in a non-binding tunnel bearing two values representing averages for each month drawn from the period of recession and depressed growth as well as from the pre-recession times when layoffs were much lower. We add, as another reference line to the chart, the midpoint between these two cases. The chart reveals that the 2007 figures were regularly at or below the midpoint line until May when the level of layoffs is higher relative to that standard. It may be that the economy is throwing off more layoffs in May than what is normal either because of calendar quirks or because of a real deterioration that is setting in.

But the chart, even though it uses NSA data, flags May 2007 as a month of backtracking on reducing layoffs.

The comprehensive table below provides even more comparisons. May ranks as the fifth highest layoff total in the past 14 years. April was also the fifth highest layoff month. March had ranked 9th and layoffs appeared as if they were diminishing. The three-month average ranks sixth over these same 14 years. The six-month average ranks eighth. The 12-month is displayed in the table and as of May that ranks 8th. So the ranking has been creeping up as we shorten the length to measure the moving average or to look at the month directly. The improving trend is not so clear any more, indeed it appears to have switched to one of deterioration. We can see that there has been some slippage compared to historic standards; standards that are free from the effects of seasonality.

A slight bump up in the layoff pace is not an unequivocal message.

But the steadiness of the slippage of the rankings on shorted moving averages is indicative of a true deterioration. A pick up in layoffs need not be a sign of economic weakness, however. At the moment both jobless claims and nonfarm job growth are indicating that the job market is solid – as is the 4.5% rate of unemployment. Layoffs are another way to supply labor to an already tight labor market. We know that manufacturing firms continue to shed employees and have been doing so for decades. With the pick up in M&A activity it is no surprise that layoffs step-up since that is one common result of mergers and their drive for greater efficiency.

The gradual up turn in layoffs is a trend to be aware of, but is not yet a clear signal for policy. It may be constructive or it may be a sign of true erosion and of encroaching weakness. It bears watching.

Summary Of Announced Corporate Layoffs
Rank of "13-Yr"
Challenger, Gray and Christmas: 3-Mo Avg 6-Mo Avg 12-Mo Avg 12-Mo Rank Of
  May Apr Mar May May May Average May
Announced Layoffs: 2007 71,115 70,672 48,997 63,595 65,736 67,523 8 5
Same Mo. Year ago (2006): 53,716 59,688 64,975 59,460 79,514 84,503 6 9
Same Mo. Year ago (2005): 82,283 57,861 86,396 75,513 89,387 88,218 5 2
Same Mo. 2-Years ago (2004): 73,368 72,184 68,034 71,195 83,569 89,500 4 4
Same Mo. 3-Years ago (2003): 68,623 146,399 85,396 100,139 110,622 113,426 2 6
Same Mo .4-Years ago (2002): 84,978 112,649 102,315 99,981 139,686 154,906 1 1
Same Mo.5-years ago (2001): 80,140 165,564 162,867 136,190 131,037 74,439 7 3
Same Mo.6-years ago (2000): 27,036 37,291 55,783 40,037 41,644 103,205 3 12
Same Mo.7-years ago (1999): 55,231 54,399 68,984 59,538 70,553 65,201 9 8
Same Mo.8-years ago (1998): 27,631 48,758 23,028 33,139 45,637 39,950 11 11
Same Mo.9-years ago (1997): 21,004 15,214 50,182 28,800 34,646 31,851 13 13
Same Mo.10-years ago (1996): 30,845 30,810 37,486 33,047 47,598 41,526 10 10
Same Mo.11-years ago (1995): 58,530 15,678 27,809 34,006 33,240 35,253 12 7
Comparative Data May Apr Mar Values for previous months    
Recession & Post Recession       3-Mo 6-Mo 12-Mo Month of May
  Median (3-Yrs) 80,140 146,399 102,315 100,139 131,037 113,426 tends to be lower than
Pre-Recession (1995-2000) Apr 60.0%
  Median (6-Yrs) 29,238 83,524 77,190 79,759 90,588 88,822 of the time
MIDPOINT-Median 54,689 114,962 89,753 89,949 110,812 101,124    
% of Pre & Post Gap 82.3% -20.4% -112.2% -79.3% -61.4% -86.6%    
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