More worrying: Labor force participation on decline
by Don Fenley
WARN Act-mandated layoff notices are piling up in northeast Tennessee and southwest Virginia. Utility Trailer in Glade Spring – 326 layoffs. Scholle in Chilhowie – 128 layoffs. FLSmidth in Johnson City – 113 layoffs. Kennametal in Johnson City – 141 layoffs. Domtar in Kingsport – 308 layoffs (more on that on page 11). Cooper Standard in Surgoinsville – 86 layoffs. And, those are just the large employers mandated to publicize their layoff plans. Many other jobs are being cut under the radar.
While the Tri-Cities unemployment rate dropped to 8.7 percent in July, which at first glance might seem like good news, there were no local nonfarm job gains. By way of contrast, the national labor market created 1.8 million jobs.
Regional employers slashed 1,500 jobs from the June total. Employment dropped by almost 1,500 people. And, there were a little over 2,500 fewer workers in the labor force.
Some state and local officials continue pointing to the dropping unemployment rate as a sign that the jobs economy is improving. But when the jobless rate falls – as it did in July – because of a drop in labor force participation instead of an increase in employment, it’s not a sign of an improving employment picture. Local workers are aging out of the labor force and others who are voluntarily – or otherwise – retiring by firms looking to trim costs with younger workers. Either way, the labor force participation rate is getting smaller. And a smaller labor force means a declining economy unless there is a new technology that makes up the difference.
There were 187,800 nonfarm Tri-Cities jobs in July. One must go back to July 1993 to find a lower total.
July is usually the bottom of the seasonal jobs slump. The typical seasonal pattern is for the jobs total to bottom in July then begin steadily climbing through November – the beginning of the holiday season. But, there hasn’t been anything typical about 2020, so far.
From laid off to ‘your job is gone’
Many of the most recent layoffs are the result of the recession we’re in and not direct health issues related to COVID-19. And, some furloughed workers are learning they won’t be coming back as businesses brace for the possibility of years of pandemic-related disruption. At the same time, companies across the nation that are bringing back furloughed workers are making reductions – fewer total staff and fewer hours – as they adjust to the new reality that many coronavirus-related closures won’t be resolved until fall, according to the Wall Street Journal.
Another hand-me-down from the national economic mood is the fact that layoffs now reflect a shift in corporate thinking toward a more protracted crisis. Economist Dr. Jon Smith of ETSU recently pointed out one key fact driving that line of thought. “During the early days of this crisis, the Fed put $3 trillion into the economy. I don’t think the chances are very good they’ll do that again.”
Smith is not alone in lacking optimism for a V-shaped recovery. Almost 80 percent of the economists participating in a National Association of Business Economics survey think there is at least a one-in-four chance of a double-dip recession. Nearly half of the 235 respondents to the survey said the COVOD-19 response from Congress was insufficient. That survey was taken in late July and early August.
While some are focusing on a double-dip recession, others point out that we’re already in a K-shaped recession that they expect to continue. A K-shaped recession is one that affects some, but not all, of the population. Harvard’s Opportunity Insights big data project points to that with the Tennessee June 27 employment data compared to January this year. It says state employment for low-wage workers – $27,000 a year and below – is down 8.7 percent and middle-wage employment -$27,000 to $60,000 – is down 0.2 percent. During the same time frame, employment for those making $60,000 a year or more is up 5.2 percent.