The jobs problem you don't know about
The sharp jump in layoffs gets all the attention, but it's the lack of hiring and job openings that pose greater risks for the labor market and economy.
NEW YORK (CNNMoney.com) -- January was one of the worst months for layoffs ever, with nearly a quarter-million job-cut announcements grabbing headlines.
But the real problem in the U.S. labor market today isn't layoffs. It's a hiring freeze that is gripping most work places - and has not gotten nearly as much attention as the job cuts.
"The hiring rate has caved. That's why the job market is as bad as it is," said Mark Zandi, chief economist with Moody's Economy.com. "Given this low hiring rate, unemployment would still rise even if layoffs were falling."
The government's key employment report, released Friday morning, doesn't detail hiring and job openings. It instead gives overall change in the number of workers on U.S. payrolls.
It was another terrible report, with employers shaving 598,000 jobs off of U.S. payrolls, the biggest drop in 34 years. The unemployment rate climbed to 7.6%, which was a 16-year high. Both results were worse than economists' forecasts.
But since 2000, the Labor Department has also tracked hiring, job openings and layoffs. And the most recent readings on those statistics show that the level of hiring and job openings has actually tumbled more than layoffs have soared.
Through November, the number of layoffs was up 17% from year-earlier levels. But the amount of workers who were hired during November was down 26%, and the number of job openings tumbled 30%.
While layoffs are likely up from the November levels, the hit to hiring has also gotten much more severe, according to experts. And that means that once people do lose their job, it's going to be even tougher to find a new one.
The Conference Board's tracking of online job listings shows a decline of more than 1 million listings in the last two months alone. That's a 23% decline in postings since November. The weakness in job postings is widespread, with only two states, North Dakota and Wyoming, having fewer unemployed people than advertised job openings.
During the last recession in 2001, there was not nearly as sharp a drop in hiring and job openings. In fact, the hiring and job opening rates, which compare new hires and openings to the overall number of workers, are both at their lowest level on record.
And economists say that even if the number of layoffs peaks soon, the pace of hiring and job openings may remain soft for months to come.
"The issue of hiring is often overlooked," said Gad Levanon, senior economist for The Conference Board. "But it's the key to the labor market. In the last recession, layoffs reached their peak in late 2001. But hiring didn't reach its lowest level until 2003, and that's when the job losses finally ended."
Andrew Reina, practice director for job placement firm Ajilon Finance Solutions, said hiring freezes are now the rule at most companies.
"A lot of our clients are looking at hiring freezes, certainly in the short term, and most likely through the first half of this year," he said.
Economist Robert Brusca of FAO Economics added that hiring freezes are an easier way for many companies to reduce work forces than layoffs, since even in bad times people will leave companies on their own.
And he said the hiring freezes won't end until companies have some confidence that the economy and demand for their products are ready to turn around.
"It's pretty clear that fear is running the show right now," he said.
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