Monday, January 5, 2009

Arizona's Unemployment Insurance Claims reach record high

Experts: Layoffs may peak by summer

End to job losses may signal start of recovery

Arizona layoffs have soared recently as the recession has deepened, but some experts believe the faster we get through the layoffs, the quicker the economy will recover.

They hope layoffs will peak before the spring or summer. And they believe that technology likely will play a key role in the recovery.

One thing that sets this recession apart from previous ones is that companies rely more on technology to tell them when sales are down and when they need to reduce inventories, cut back on production or let workers go, said Joel Naroff, a Philadelphia economic forecaster.

"They are adjusting almost immediately in a real-time basis . . . making the numbers look uglier," he said.

In November, Arizona was one of 15 states that had a record high average number of newly laid-off workers filing claims for unemployment insurance, the U.S. Department of Labor reported.

Claims are considered the best gauge of layoffs. The number of initial claimants more than doubled in November, compared with a year earlier.

And the increases continued to accelerate during the first three weeks of December, with 10,427 to 11,387 more Arizonans filing initial claims each week for the state's maximum $240-a-week benefit, according to the Arizona Department of Economic Security. In some weeks, the number was almost triple a year earlier.

Traditionally, the unemployment rate climbs for as long as 18 months after the end of a recession because it normally takes about that long for firms to realize they can't afford to keep as many workers.

"Everything is coming to a head right now and will be over in the next three or four months, maybe six, in terms of layoffs and the slowing of the economy," Naroff said.

John Challenger is chief executive officer of Challenger, Gray and Christmas, a Chicago-based international employment company. He said "there is no question that layoffs are real heavy right now" and agreed that companies are reacting more swiftly to sales data.

"I think there is real hope they (layoffs) will subside in the spring or summer time period," he added.

The Society for Human Resource Management in Alexandria, Va., learned from a recent survey of members that 48 percent had laid off workers in 2008 and 60 percent planned to lay off more in 2009. The most likely to be laid off were unskilled laborers and those in administrative posts. Least likely: executives and sales workers.

In addition to the recession, Challenger said layoffs were growing because companies have moved away from keeping loyal employees through the ups and downs. "I think today companies look at their hiring or employment as a more just-in-time basis," he said.

Michael Hayes, owner of Momentum Specialized Staffing in Phoenix, said when the economy recovers, companies that have laid off heavily could have problems finding qualified people to hire. "Now companies are starting to lay off what I call their 'stars' and not just their marginal employees," he said.

A wide variety of sectors are laying off, particularly construction, retail and manufacturing, according to the Arizona Department of Commerce.

Even some areas believed to be doing well are shedding jobs, such as health care and social assistance, categories that in November had about 3,000 former workers on unemployment benefits.

Another job sector that shrunk is truck driving, Hayes said. His company used to specialize in placing truck drivers but has diversified.

"If I put in an ad for a Class A driver, I would get probably 300 applications," he said. "I mean, boom, it's just blown up. Lots of those people are out of work, and those are high-paying jobs."

The rapid rise in unemployment claims may seem at odds with the state's unemployment rate, which has climbed only from 4.1 percent in November 2007 to 6.3 percent in November 2008.

But Pat Harrington, a DES assistant director who oversees the unemployment-insurance program, as well as other employment experts, consider the rise in unemployment claims to be a better indicator of rising unemployment than the unemployment rate.

Claims are based on actual numbers of newly jobless people, while the unemployment rate is based on a household survey. In fact, the claims data understate the number of workers laid off because not all workers are eligible for unemployment insurance.

"What happens over the last six months is that these claim numbers have been rising faster than the unemployment rate has been getting higher," Harrington said. "So if that continues to be the case, then the rate is going to get higher."

Because of the extra workload, his department had to add 78 employees between May and November and is now hiring another 45 temporary workers to process unemployment claims.

"We are trying to get ahead of it in terms of staffing people to handle this. It's been very difficult to know how many (claims) we are going to have."

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