Drop In Mass Layoffs Masks Trouble At Small Businesses

The Labor Department says that “mass layoffs”, job cuts of 50 more more people simultaneously, hit a 16 month low in November. Incidents of big downsizing fell to 330 from 1,797 in October. There have been a total of 27,669 mass layoffs since the beginning of the year. That number may not be correct at all. The Labor Department is unlikely to have access to data each time a company cuts 50 people, especially if those layoffs occur over two or more months.

The numbers also mask labor changes at small companies which are the engines of job growth.

The Census Bureau reported that in 2004 of the 115 million people employed by businesses, almost 60 million worked at companies with few than 499 employees. Forty million worked at companies with under 99 employees. These small firms have been particularly hard hit by the recession and credit crisis. The federal government has acknowledged this and plans to carry out programs to give new aid to companies that have relatively few workers. One program under consideration would take $30 billion in TARP funds and channel it to small business loans.

But, small firms are likely to carry a large burden in expenses due to the new healthcare bill which will require them to carry worker health benefit costs.

California recently said small business bankruptcies are up 81% this year. The largest state by population has been hit harder by the recession than many others, but the figure certainly points to a nationwide problem.

Mass layoff statistics may be a poor indication of employment trends, more than offset by small businesses cutting workers or worse going into bankruptcy.

Douglas A. McIntyre