Tri-Cities economy shredding jobs; from laid off to your job’s gone

The Tri-Cities unemployment rate dropped to 8.7% in July. But unlike the national labor market that created 1.8 million jobs, there were no local nonfarm job gains.

 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. When unemployment falls – as it did in July – because of a drop in participation is usually a bad sign.

There were 187,800 nonfarm Tri-Cities jobs in July. You have to go back to July 1993 for a lower total.

July is usually the bottom of the seasonal jobs slump. The 1,500 jobs loss number is the preliminary, nonadjusted Bureau of Labor Statistics (BLS) count. Seasonally adjusted, it drops to 300. It also marked a reversal of the quick snapback from April’s COVID-19 driven job losses.

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 normal about 2020, so far.

April-July gain/loss snapback

All sectors except government – the region’s third-largest jobs provider in July – have gained jobs when benchmarked against April’s 19,000 job loss. The biggest gain is in the sector that took the biggest hit – Leisure and Hospitality.

Jan-July sector totals

The only positive sector is Mining, Logging and Construction. Thank the new home market for most of that gain.

The biggest negative since the first of the year is government followed by manufacturing.

From laid off to your job is gone

Much of the most recent layoffs are the result of the recession we’re in and not COVID-19. And some furloughed workers are learning they won’t be coming back as businesses brace for 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 layoffs now reflect a shift in corporate thinking toward a more protracted crisis. “Companies that thought they could either cut wages temporarily or cut costs temporarily to hold on are now finding out that the weakness of the pandemic is now longer than they hoped,” Grant Thornton Chief Economist Diane Swonk told the Wall Street Journal.

Some local examples include layoffs, restructuring or closures at Domtar, Cooper Standard, Kennametal, Neopharma, and the announcement by Eastman that it would be reducing its global workforce by year’s end. Those are other examples that affect fewer workers than the mandated public notice that fly under the public radar.

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 good sign. 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.

Almost 80% 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 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-shared 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% and middle-wage employment -$27,000 to $60,000 – is down 0.2%. During the same time, frame employment for those making $60,000 a year or more is up 5.2%.

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