The March jobless report, which shows no sign of a letup in the increasing monthly pace of job elimination, is alarming. Even more alarming are the recent comments by some experts that we may be nowhere near the peak of the layoff tsunami. This suggests, to me, that more action by the Obama administration is called for to target the layoff problem directly.
While the administration should be commended for the fast pace of immediate action it has taken, in its early months, on the overall effort to turn the economy around, several more months of layoffs at the current pace could impose tremendous human and financial costs from which it could take years to recuperate, and could retard the pace of the overall economic recovery when it finally begins.
Granted, this is easier said than done. We all understand that the layoffs are a dramatic sign of the measures businesses are taking to preserve precious cash in an environment of declining sales and still-tight credit. It’s also well known that, in recessions, the worst waves of layoffs often occur after the overall economy has already started to recover. Layoffs are a “lagging indicator,” reflecting events businesses experienced several months back. The March numbers likely reflect dismal results that were showing up for many businesses as they prepared to report their first-quarter financials.
Obviously the administration doesn’t have the power to control layoffs directly. But there may be certain interventions that could help. Here are just a couple of top-of-the head ideas, the administrative and financial viability of which, of course, would need to be evaluated:
- Tax breaks, perhaps in the form of a limited-time waiver of Federal Unemployment Tax payments, for each employee a business calls back from a layoff
- A tax break or partial federal guarantee to banks on any increase to a company’s credit line needed to return a laid-off employee to the payroll
I am sure that the likes of Paul Volcker, Austan Goolsbee, and the other great minds on the President’s economic team could come up with even better, more creative ideas. And it also seems logical that an incentive-based program to put employees back to work quickly at what they were doing previously could help the recovery by creating an efficiency advantage, compared to displaced employees churning through a slow-moving job market, only to face learning curves after finally securing new positions.
But regardless of what form any specific actions might take, the numbers seem to be warning us that action is needed, and soon, to intervene more directly in the layoff crisis.
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