Economy Facing Worst Hiring Slump in 20 Years | AccountingWEB

Economy Facing Worst Hiring Slump in 20 Years

The New York Times reported last week that the U.S. economy is experiencing its worst hiring slump in nearly 20 years and the end is not in sight. According to U.S. Labor Department statistics, the economy has lost more than 2 million jobs for a drop of 1.5 percent since March 2001. Unemployment statistics do not accurately reflect the rate of unemployment because many unemployed people have stopped looking for jobs. ("U.S. Economy in Worst Hiring Slump in 20 Years," The New York Times, February 6, 2003)

The greatest number of job cuts has occurred in durable goods manufacturing, such as computers, furniture, and steel, where 11% of jobs have been eliminated in the past two years. Following close behind are the airlines, brokerage firms, and clothing and textile industries which have experienced a loss of 10% of jobs in the same time period. Government agencies, on the other hand, continue to expand and increase the number of employees.

Companies are struggling to maintain levels of production with fewer employees, using new technologies to produce more, and rewarding existing employees who are most productive. Applebee's restaurant chain, for example, reports changing its pay raise structure to a policy of merit raises for the most productive employees. The result has been evident in increased sales without an increase in the size of the employee base.

The decrease in the number of companies hiring new employees is evident in the fact that the number of help-wanted newspaper advertisements in December 2002 was at its lowest level in 40 years. Not only is the number of unemployed people continuing to grow, the duration of unemployment is increasing is as well. Currently, nearly 1.9 million people actively looking for work have been unemployed for at least six months. Two years ago about 630,000 unemployed people held that dubious record.

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