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September 1983, Vol. 106, No. 9

Layoffs and permanent job losses:
workers' traits and cyclical patterns

Robert W. Bednarzik

Layoffs are probably the most visible and, thus, the most widely recognized form of unemployment in the United States, as recessionary job cutbacks receive broad coverage in the media. It is, therefore, surprising that little empirical analysis, especially prior to the mid-seventies, was done on this group.1 This stems, in part, from the fact that traditional theories of unemployment did not consider a distinction between layoffs and other types of unemployment—permanent separations, quits, and labor force entries and reentries—to be of significant importance.

This article discusses the "uniqueness" of persons on layoff as distinguished from those who have been permanently separated from their jobs. Data for each group are available back to 1967, when the "reason for unemployment" was first identified in the Current Population Survey (CPS), although they were not tabulated and published separately until 1976. Using these data, demographic and occupational and industry profiles of persons on layoff and those permanently separated are presented. Also, the cyclical variability in the number of workers on layoff relative to the number permanently separated, together with each group's job search and job change behavior and duration of unemployment, is examined to determine its role in short-run and long-run unemployment patterns. For example, data show that, compared with prior recessions, a greater proportion of the increase in unemployment in the recent recession is attributable to workers who were permanently separated from their jobs. Layoffs, which were concentrated among factory workers, were also severe, but not much different from the deep 1973-75 economic downturn.

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1 Martin Feldstein, "The Importance of Temporary Layoffs: An Empirical Analysis," Brookings Papers on Economic Activity, No. 3, 1975, pp. 725-44, was among the first to recognize the importance of the layoff component of unemployment. It was followed by: Thomas F. Bradshaw and Janet Scholl, "The Extent of Job Search During Layoff, Brookings Papers on Economic Activity, No. 2, 1976, pp. 515-26; Martin Feldstein, "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, December 1978, pp. 834-46; David M. Lilen, "The Cyclical Pattern of Temporary Layoffs in United States Manufacturing," Review of Economics and Statistics, February 1980, pp. 24-31; Kenneth Burdent and Dole T. Mortensen, "Search, Layoffs, and Labor Market Equilibrium," Journal of Political Economy, August 1980, pp. 652-72; James L. Medoff, "Layoffs and Alternatives under Trade Unions in U.S. Manufacturing," American Economic Review, June 1979, pp. 380-95; and Francine D. Blau and Lawrence M. Kahn, "Causes and Consequences of Layoffs." Economic Inquiry, April 1981, pp. 270-96.

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