Order Code RL30799
CRS Report for Congress
Received through the CRS Web
Unemployment Through Layoffs:
What Are the Underlying Reasons?
Updated April 25, 2005
Linda Levine
Specialist in Labor Economics
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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Unemployment Through Layoffs:
What Are the Underlying Reasons?
Summary
Unemployment can come about in a number of ways, but the form of
unemployment that policymakers have shown they are most concerned about occurs
when businesses displace employees. Congress has demonstrated its desire to assist
workers who have involuntarily lost jobs through no fault of their own by its
provision of income support under the Unemployment Insurance program and the
Trade Adjustment Assistance (TAA) program, training for dislocated workers under
the Workforce Investment Act (WIA) and TAA, and notice of mass layoffs and plant
closings under the Worker Adjustment and Retraining Notification Act (WARN).
Unemployment through layoffs ebbs and flows with the business cycle, but
involuntary job loss is ever-present because firms displace workers for reasons other
than temporarily weak demand. Employers also conduct layoffs for reasons specific
to them or their industry (e.g., import competition and seasonal work).
The term “downsizing” was coined to describe a practice that became prevalent
during the 1980s of typically “old economy” manufacturers restructuring their
operations through large-scale layoffs to become more competitive in the global
marketplace. Reorganizing work to improve competitive advantage has since spread
to “new economy” manufacturers and to firms in the service sector. It also
encompasses more than downsizing, such as outsourcing work to facilities within and
outside U.S. borders. By definition, restructuring achieved through downsizing
produces a net loss of jobs at firms. This is not necessarily the case at companies that
outsource work. Even if businesses that are engaged in offshore outsourcing are
laying off workers, they may be hiring at least as many new employees.
The various series on layoffs provide little data on offshore outsourcing (also
referred to as offshoring). To obtain some measure of offshore outsourcing, the U.S.
Bureau of Labor Statistics added questions to its extended mass layoff series in 2004
about whether these events include movement-of-work actions within or outside the
country’s borders and among a firm’s own facilities or to other firms. (Extended
mass layoffs are defined as lasting longer than 30 days and involving at least 50
workers.) Outsourcing of work — particularly of work moving offshore — accounts
for a small share of all employees separated from payrolls through extended mass
layoff events. Of all employees in the private nonfarm sector let go in extended mass
layoffs in 2004, some 9%-11% were displaced in events involving domestic and
offshore outsourcing; perhaps 3% in layoff events that specifically involved
offshoring. Work was more often transferred between a company’s own facilities
than to other firms among the extended mass layoffs that involved outsourcing, either
domestic or foreign. A majority of layoff events that entailed outsourcing actions
occurred at manufacturers. Outsourcing activity also was most often due to company
restructuring (change in business ownership, internal corporate reorganization,
financial difficulty, and bankruptcy).
This report will be updated as warranted.

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Contents
Restructuring Work for Competitive Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Sources of Information on Layoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Layoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Current Population Survey (CPS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Job Openings and Labor Turnover Survey (JOLTS) . . . . . . . . . . . . . . . 4
Mass Layoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Mass Layoff Statistics (MLS) Program . . . . . . . . . . . . . . . . . . . . . . . . . 5
Employer Announcements of Large Staff Cuts . . . . . . . . . . . . . . . . . . . 6
Mass Layoff Trends and Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Employer Announcements of Mass Layoffs . . . . . . . . . . . . . . . . . . . . . . . . . 7
The MLS Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Reasons for Extended Mass Layoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Offshore and Domestic Movement of Work . . . . . . . . . . . . . . . . . . . . 10
List of Tables
Table 1. Staff Cuts Announced by U.S. Companies . . . . . . . . . . . . . . . . . . . . . . . 8
Table 2. Short- and Long-Term Mass Layoff Activity . . . . . . . . . . . . . . . . . . . . 10

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Unemployment Through Layoffs:
What Are the Underlying Reasons?
Unemployment can develop in a number of ways, such as an individual
(re)entering the labor force and being unable to immediately find a job or a person
quitting a job at one firm before having obtained a job at another firm. The form of
unemployment that policymakers have shown they are most concerned about occurs
when businesses layoff employees. Congress has demonstrated its desire to help
workers who have involuntarily lost their jobs through no fault of their own, and are
presumed to face an indeterminate spell of unemployment, by its provision of income
support under the Unemployment Insurance (UI) program and the Trade Adjustment
Assistance (TAA) program, training for dislocated workers under the Workforce
Investment Act (WIA) and TAA, and advance notice of pending mass layoffs and
plant closings under the Worker Adjustment and Retraining Notification Act
(WARN).
Although involuntary “no-fault” displacement from jobs is always with us, this
form of unemployment increases when the economy is sluggish and decreases when
the economy is robust. In other words, there is a cyclical component to layoff
activity. However, firms lay off workers not only due to temporarily weak demand
throughout the economy, but also due to factors specific to them or their industry
(e.g., company reorganization and seasonal work). The current interest in involuntary
job loss springs from two sources: the sluggish response of the labor market to the
end of the latest recession in November 2001, and the reportedly increasing practice
of U.S. firms sending work to firms located in other countries — commonly known
as offshore outsourcing or offshoring.
This report focuses on unemployment through layoffs. It first briefly provides
a context for the offshore outsourcing phenomenon and its relationship to gross and
net employment change. The report next examines the available sources of data on
layoffs to determine whether they provide information on the reasons that underlie
those events. It then analyzes the trend in, severity of, and explanations of extended
mass layoffs. The report concludes with a discussion of those extended mass layoff
events that involve movement-of-work actions (within the same firm but to its other
U.S. locations, to other U.S. firms, to foreign-based affiliates of the U.S. company,
and/or to foreign businesses).

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CRS-2
Restructuring Work for Competitive Purposes
U.S. firms have, in the past few decades, been restructuring their operations to
be more competitive in the global marketplace by:
! downsizing their workforces;
! outsourcing functions, ranging from performing janitorial services
to developing computer software, to firms located within and outside
the United States; and
! utilizing contingent workers, such as independent contractors and
temporary workers.1
The term “downsizing” was coined during the 1980s to describe a practice
among, typically, very large “old economy” manufacturers to become more efficient
international competitors by each laying off thousands of employees — sometimes
in multiple rounds of mass layoffs — and closing entire facilities. Since then,
downsizing has spread to “new economy” manufacturers (e.g., computer producers)
and to companies in the service sector, particularly those affected by the bursting of
the dot-com/telcom/stock market bubble, including internet-related companies,
telecommunications firms, and financial enterprises.
Similarly, the practice of contracting out or outsourcing of activities to other
companies — particularly to firms located outside the United States — reportedly has
grown since the 1990s. It has been suggested that employers increasingly have been
able to achieve efficiencies through offshore outsourcing due to improved internet,
telephone, and transportation links with countries (e.g., India) whose educational
systems have expanded the worldwide supply of English-speaking, well-educated
graduates who possess, among other skills, those in the field of information
technology (IT).2
As a result, the kind of worker who is susceptible to involuntary job loss has
changed. Whereas displacement once occurred primarily among traditionally layoff-
prone blue-collar factory workers, the risk of job loss has increased among
traditionally stable white-collar workers (e.g., IT workers). Consequently, concern
about job security has spread from blue-collar to white-collar workers, who make up
the majority of all employees in the labor market. Some observers, including Federal
Reserve Board Chairman Alan Greenspan, attribute the lack of upward pressure on
wages despite an extremely tight labor supply in the late 1990s to workers’
perception of heightened job insecurity.
By definition, restructuring achieved through downsizing produces a net loss of
jobs at firms. This is not necessarily the case at companies that utilize contingent
1 For more information, see CRS Report RL32387, Self-Employment as a Contributor to Job
Growth and as an Alternative Work Arrangement, by Linda Levine.
2 For more information, see CRS Report RL32292, Offshoring (a.k.a. Offshore Outsourcing)
and Job Security Among U.S. Workers, by Linda Levine.

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CRS-3
workers or outsource work. If these employers are laying off workers, they may be
hiring a greater, equivalent, or lesser number of people.
Overlaid on these ongoing changes in how firms organize their operations,
which may or may not result in involuntary job loss, is the business cycle. During
the long economic expansion that characterized much of the 1990s, for example, net
job growth and layoffs occurred simultaneously according to data from the U.S.
Bureau of Labor Statistics (BLS). Over 20 million private sector nonfarm jobs were
added between 1991 and 2000, and during 2000, the unemployment rate dropped to
a 30-year low of 4.0%. Nonetheless, in 2000, employers permanently displaced
almost two million workers from their private sector jobs through mass layoffs.
Job losses usually have not persistently exceeded job gains at the national level,
thereby yielding a net decrease in employment, except during recessions.3 However,
after employment contracted by almost 300,000 jobs in the private nonfarm sector
and the unemployment rate averaged 4.7% in 2001 (during the latest recession), 1.9
million more jobs were lost than gained in 2002, and the unemployment rate rose still
further to 5.8% for the year.4 In contrast, although remaining high by historical
standards, the number of workers who permanently lost their private sector jobs
through mass layoffs dropped by nearly 300,000 in 2002. Despite employment
starting to grow during 2003, signaling the end of the “jobless recovery,” the net
change in employment for the year was negative (a net loss of some 400,000 private
nonfarm jobs). The unemployment rate similarly showed no improvement for the
year, edging up to 6.0%. In contrast, the number of workers permanently displaced
from their private sector jobs as part of mass layoffs fell in 2003 as it did in 2002, but
to an even greater extent (by almost 400,000). Not until 2004 did the private
nonfarm economy record a net increase in employment (of almost 1.5 million jobs)
and the unemployment rate fell 0.5 percentage points to 5.5%, while the number of
employees separated from payrolls through mass layoffs continued to trend
downward.
Sources of Information on Layoffs
Data series measure layoffs in different ways. One, for example, tracks at the
national level the number of persons who are unemployed by broad reason for their
joblessness. Another focuses on the number of workers displaced in lengthy
(permanent) mass layoffs, which are considered to be more difficult to recover from
for the affected workers and geographic areas. Only one tries to determine whether
layoffs are associated with the relocation of work (within the same firm but to its
other U.S. locations, to other U.S. firms, to foreign-based affiliates of the U.S.
company, and/or to foreign businesses).
3 For more information, see CRS Report RL32194, Job Loss: Causes and Policy
Implications, by Marc Labonte.
4 For more information, see CRS Report RL32047, The “Jobless Recovery” from the 2001
Recession: A Comparison to Earlier Recoveries and Possible Explanations, by Marc
Labonte and Linda Levine.

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CRS-4
Layoffs
Current Population Survey (CPS). The CPS is a monthly survey of
households from which the unemployment rate is derived. It includes a question on
reason for unemployment. Unemployed persons are categorized as job losers if they
report they are on a temporary layoff (meaning that their employer has given them
a date to return to work or that they expect to return to their jobs within six months)
or they have permanently, involuntarily lost their jobs. Individuals are not asked
about why they were involuntarily terminated.
The other reasons for unemployment are having left a job voluntarily, having
completed a temporary job, and newly entering or reentering the labor force. In all
cases, the individual must currently be looking for a job to be classified as
unemployed. Thus, if job losers become discouraged about their reemployment
prospects and stop searching for work, their reason for being jobless would not be
tallied.
In 1999, before the start of the last recession, an average of 848,000 workers
stated that they were on temporary layoff, and more than 1.2 million workers
indicated they had been permanently let go by their private or public sector
employers. In 2001, during which the most recent recession ended (November), the
number of temporarily laid off workers rose to almost 1.1 million, and the number
of permanently separated workers reached almost 1.8 million. The number of job
losers continued to climb during the “jobless recovery”: while the number of
workers on temporary layoff was virtually unchanged between 2002 and 2003, the
number of workers who reported permanent job losses continued to grow, reaching
2.8 million. The increase of almost 150,000 permanent job losers in 2003 was much
less than the more than 900,000 increase in 2002, however. Both the number of
workers on temporary and permanent layoffs decreased in 2004, with the latter falling
by about 400,000 to 2.4 million.
Job Openings and Labor Turnover Survey (JOLTS). BLS initiated a
new program, JOLTS, within the last few years that collects data on job openings and
labor turnover from a sample of establishments subject to state UI laws as well as
federal agencies subject to the Unemployment Compensation for Federal Employees
program. More specifically, data on total employment, job openings, hires, quits,
layoffs and discharges, and other separations by month are available from December
2000 forward.
Of interest in terms of this report are the figures on separations due to layoffs
and discharges. These involuntary terminations are defined in JOLTS to include
layoffs with no intent on the employer’s part to rehire their former employees and
layoffs that have lasted or that the employer expects to last more than seven days;
discharges that arise from downsizing, mergers, closings, and firings or other
discharges for cause; and terminations of permanent, short-term, or seasonal
employees. Employers are not asked about the reasons underlying the layoffs and
discharges.
As the data are not adjusted for regularly recurring seasonal fluctuations,
comparisons should not be made from one month to the next within a year but rather

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CRS-5
from a given month in one year to the same month the next year. The number of
layoffs and discharges in the private sector declined in 7 out of 12 months in 2004
compared to the same months in 2001. For example, in November 2004, 1.5 million
private sector employees were laid off or discharged, compared with 1.8 million in
November 2001 at the recession’s end. Similarly, the monthly rates of layoffs and
discharges were unchanged or declined in 7 months of 2004 compared with 2001.
For example, the number of layoffs and discharges as a share of private sector
employment was 1.4% in November 2004 and 1.7% in November 2001. Some
industry groups experienced more of an improvement than others in their
layoff/discharge rates between November 2001 and November 2004. Information
(i.e., publishing, including software publishing, and traditional publishing and
publishing exclusively on the internet; motion pictures and sound recording;
broadcasting, including exclusively on the internet; telecommunications; and internet
service providers, web search portals, data processing, and information services) and
construction showed the largest decline in the layoff/discharge rate. The two industry
groups were followed closely by real estate/rental/leasing and nondurables
manufacturing, and more distantly by durables manufacturing, leisure/hospitality, and
accommodations/food services. In contrast, professional and business services
recorded an increase (from 1.4% to 2.1%) in the layoff/discharge rate.
Mass Layoffs
Mass Layoff Statistics (MLS) Program. Under the Job Training
Partnership Act of 1982 (JTPA), the U.S. Department of Labor (DOL) was charged
with obtaining information about mass layoffs and plant closings. The Employment
and Training Administration (ETA) used JTPA funds to have the BLS develop the
Mass Layoff Statistics (MLS) program. The program was terminated in 1992 for
budgetary reasons. After ETA gave it funds to do so in 1994, BLS resurrected the
MLS program in 1995, with some improvements (e.g., coverage of all states) that
make 1986-1992 data noncomparable with more recent data. The DOL announced
in December 2002 that the MLS program was terminated again due to lack of a
funding source, but in P.L. 108-7, the omnibus FY2003 appropriations bill, Congress
included money in the BLS budget for resumption of the series.
The MLS program consists of two series:
! In its monthly series, BLS defines a mass layoff as an event
involving 50 or more workers from a single establishment who file
initial claims for UI benefits. The only information available on a
monthly basis is the number of layoff events and the number of
initial UI claimants disaggregated by state and industry group
separately.
! In its quarterly series, BLS provides more detailed information on
extended (permanent) mass layoffs, which are defined as those
above-described layoffs that last more than 30 days. Additional
information is obtained by querying employers that have layoffs
longer than 30 days, including the reason for the layoff and whether
it involved the relocation of work. Through 2003, covered
establishments in both series included employers throughout the

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CRS-6
economy. For budgetary reasons, the extended mass layoff series
began covering only nonfarm employers in the private sector in
2004. The mass layoff series, which is based solely on
administrative records, continues to include agricultural and
government employers.
Employer Announcements of Large Staff Cuts. A more frequently and
regularly reported source of information on substantial staff cutbacks has been
announcements of impending actions that are issued by individual firms. However,
several drawbacks exist in using the timely layoff announcements to gauge the actual
circumstances of workers, firms, and communities. Companies make announcements
about their expectations, but these may or may not come to pass as planned.
Although firms sometimes include statements in financial reports about how their
restructuring plans have been implemented, there is neither readily available nor
comprehensive information on their actual outcomes. In addition, layoff
announcements commonly are interpreted as calling for involuntary job cuts, but
some employees accept early retirement or voluntary severance offers while others
accept transfers to jobs within their own firms or to reorganized entities. Moreover,
the announcement of a layoff in a given month does not mean that affected workers
are displaced immediately or terminated as a group. Instead, a layoff might involve
varying numbers of people being released at different intervals over many months or
years. This scenario would have considerably less of an adverse impact on a
community’s labor market, which could more easily absorb the displaced workers
who had not found new jobs before their termination.
The impetus for issuance of these announcements was passage of the Worker
Adjustment and Retraining Notification Act (WARN, P.L. 100-379), which went into
effect in 1989. The act requires firms with 100 or more employees to provide notice
to employees or their union representatives and to local/state government officials 60
days before initiating a major layoff or closing a plant. Because smaller businesses
do not have to issue these notices, some unknown number of mass layoffs cannot be
detected from this source. Policymakers have introduced legislation to amend
WARN by, among other things, requiring firms to provide notice and other
information about offshoring that results in layoffs.5
A comprehensive database of these announcements does not exist because there
is no legal requirement that the notices be filed with a single entity. Some of these
announcements are reported by the media or other information-gathering
organizations. These reports might include only the most newsworthy layoff events
(e.g., those involving the nation’s or a geographic area’s largest employers).
Moreover, these reports might not mention the hiring expectations of some of the
same firms that issue layoff announcements.6 There is likely to be considerable
5 For more information on WARN, see CRS Report RL31250, The Worker Adjustment and
Retraining Notification Act (WARN), by Linda Levine.
6 Patrick Barta, “Zero-Sum Gain: In Current Expansion, as Business Booms, So Too, Do
Layoffs,” Wall Street Journal, Mar. 13, 2000; and Carrie Johnson, “Firings, Hirings
Balancing Out,” Washington Post, Aug. 24, 2001.

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CRS-7
variability in what, if any, information is provided about the reasons for the
anticipated layoffs.
Mass Layoff Trends and Characteristics
Employer Announcements of Mass Layoffs
The severity of mass layoffs had been decreasing since the early 1990s as the
economy slowly recovered from the 1990-1991 recession. The size of announced
layoffs fell from a peak of 615,186 employees in 1993 to 434,350 employees by
1997, according to The Challenger Employment Report.7 The trend reversed sharply
in 1998, when firms announced their intention to displace 677,795 employees,
chiefly due to economic conditions in Asian countries (e.g., Japan) and the plight of
U.S.-based oil producers and related service companies. (See Table 1.) The severity
of layoff announcements remained almost as great in 1999, when the economy still
was expanding. Retailers reported the largest number of anticipated job reductions.
Despite an increase in the number of job cuts announced late in 2000, the size of
planned layoffs for the entire year fell to 613,960. Many of the workers expected to
be let go in those actions were employed in the retail and auto industries.
The number of employees expected to be affected by layoffs announced during
the first eight months of 2001 — at 1,123,356 — was well above any full year’s total
since the series’ inception. Telecommunications, computer, electronics, and e-
commerce companies initiated many of the cutbacks that occurred during the latest
recession. In contrast, airline and related industries (e.g., hotels) accounted for many
of the 248,332 workers who were expected to be let go as a result of September’s
announcements, a direct reflection of the terrorist attacks. Fewer workers may
actually have been let go at the time, however. For example, Continental, Delta, and
US Airways announced in September 2001 that they were going to lay off about
36,000 employees. By the following month, the carriers concluded that they would
terminate fewer workers because many accepted early retirement or voluntary
separation options. As a result, the number of workers involuntarily separated from
the three airlines’ payrolls could have been reduced by some 15,500 workers.8
The number of announced job cuts diminished during the fourth quarter of 2001,
when the short-lived recession was ending. Nonetheless, the total for the year
reached an all-time high of 1,956,876.
7 The monthly report is prepared by and available for a fee from Challenger, Gray &
Christmas, Inc., an international outplacement firm. It lists individual companies that have
announced layoffs during a given month along with the number of expected job cutbacks,
industry, and reason for the action. The report largely is derived from firms’ press releases
and newspaper articles.
8 “More than 15,000 Layoffs May Be Averted by Voluntary Programs at Three Airlines,”
Daily Labor Report, Oct. 29, 2001.

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CRS-8
Table 1. Staff Cuts Announced by U.S. Companies
Year
Number of employees
1989
111,285
1990
316,047
1991
555,292
1992
500,000
1993
615,186
1994
516,069
1995
439,882
1996
477,147
1997
434,350
1998
677,795
1999
675,132
2000
613,960
2001
1,956,876
2002
1,466,823
2003
1,236,426
2004
1,039,735
Source: News reports based on The Challenger Employment Report.
The improving trend continued in 2002, during the “jobless recovery”, when it
was announced that 1,466,823 workers would be laid off. Despite the 25% decrease
in the severity of layoffs between 2001 and 2002, this was only the second year to
exceed 1 million since figures first were collected. Many of the employees who were
expected to lose their jobs worked in the telecommunications industry.
Further improvement was recorded in the following years. A total of 1,236,426
individuals were expected to be involved in layoffs announced during 2003, which
is 16% less than in 2002. Anticipated separations at telecommunications and
computer-related firms were down substantially while those at government and non-
profit organizations were up.9 The latter may reflect the delayed impact of the
recession on state and local governments’ budgets. Although remaining above one
million for the fourth consecutive year, the number of announced job cuts fell by
16% between 2003 and 2004, when they totaled 1,039,735. Telecommunications
firms cut the most jobs for the third time in the past four years, although the number
of anticipated separations were 11% lower than in 2003. Unexpectedly, given its
9 “Challenger Says Job Cuts Fell in 2003, but Pace Exceeds Boom Years of 1990s,” Daily
Labor Report, Jan. 7, 2004.

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CRS-9
good performance, the financial sector announced the second-highest cuts; they were
twice the prior year’s level.10
The MLS Program
As less than one-half of all mass layoffs identified by BLS lasts 31 days or
longer, the traditional layoff-recall pattern still predominates. Even among extended
layoffs, a majority of firms in the private nonfarm sector typically had expected to
recall their separated workers — until 2001. Less than one-half of firms reported that
they anticipated a recall of some employees let go as part of long-term mass layoffs
until 2004 (when the proportion rose to 51%), which likely reflected employers’
continuing uncertainty about the strength of the economic recovery.
Trends. As seen in Table 2, the severity of staff cuts worsened in 1998. The
elevated number of workers separated from the payrolls of firms in the private
nonfarm sector of the economy was largely due to a strike in the auto industry that
had employment repercussions in related industries. In 1999 and 2000, employee
separations that occurred as a part of extended mass layoffs dropped below levels
recorded in prior years for which data are available. But, during the recession year
of 2001, the 1.5 million employees terminated in extended mass layoffs greatly
exceeded the number in earlier times. Although there were some 250,000 fewer
private nonfarm employees let go in 2002, the number of separated workers
nonetheless totaled over 1.2 million. The figure for 2003 were virtually unchanged,
but in 2004, it dropped to slightly under 1.0 million.
Typically, few extended mass layoffs involve permanent closures of facilities
(e.g., 15% in 2004). These events also directly affect a relatively small share of all
separated workers (e.g., 16% or 157,512 workers in 2004). Manufacturers accounted
for many of the plant closings in 2004, and they most often gave company
reorganization as the reason for the action.11
Reasons for Extended Mass Layoffs. Across all private nonfarm
establishments that experience extended mass layoffs, seasonal work (e.g., the end
of winter or summer recreational activities and the end of planting or harvesting
activities) usually has been the leading reason that firms provide. In 2004, for
example, it accounted for 33% of all layoff events and 34% of all separated workers.
Internal company reorganization (bankruptcy, business ownership change, financial
difficulty, and reorganization within company) was the second most often mentioned
explanation in 2004, accounting for 20% of all extended mass layoffs and 20% of the
employees involved in them. It was a commonly given reason among employers in
the following industry groups: general credit remediation, food manufacturing, and
10 “Announced Job Cuts Fell 16 Percent in 2004, but Topped 1 Million for Fourth Straight
Year,” Daily Labor Report, Jan. 6, 2005.
11 BLS, “Extended Mass Layoffs in the Fourth Quarter of 2004 and Annual Averages for
2004,” News Release, USDL 05-264, Feb. 16, 2005. (Hereafter cited as BLS, Extended
Mass Layoffs in the Fourth Quarter of 2004 and Annual Averages for 2004.)

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CRS-10
telecommunications. Contract completion was offered as a reason for 15% of these
layoff events, which involved 17% of all separated workers, in 2004.12
Table 2. Short- and Long-Term Mass Layoff Activity
Mass layoffs
Extended mass layoffs
Initial UI
Initial UI
Separated
Year
Events
claimants
Events
claimants
workers
1996
14,111
1,437,628
4,760
805,810
948,122
1997
14,960
1,542,543
4,671
879,831
947,843
1998
15,904
1,771,069
4,859
1,056,462
991,245
1999
14,909
1,572,399
4,556
796,917
901,451
2000
15,738
1,835,592
4,591
846,267
915,962
2001
21,467
2,514,862
7,375
1,457,512
1,524,832
2002
20,277
2,245,051
6,337
1,218,143
1,272,331
2003
18,963
1,888,926
6,181
1,200,811
1,216,886
2004
15,980
1,607,158
4,879
816,259
956,327
Source: U.S. Bureau of Labor Statistics data on mass layoffs covering employees in all industries and
on extended mass layoffs covering employees in the private nonfarm sector (i.e., excludes agriculture
and government).
Note: Data for 2004 are preliminary. The number of separated workers often is larger than the
number of initial UI claimants because not all separated workers file for benefits. In contrast with the
figures on separated workers, which are provided by employers with extended mass layoffs or worksite
closings, the figures on initial UI claimants are from the regular UI reporting system and may include
claimants who are not part of a mass layoff or closing.
Offshore and Domestic Movement of Work. BLS began to ask
employers who call extended mass layoffs (for reasons other than seasonal work and
vacation periods) additional questions in 2004 to learn about layoff events that
include offshore outsourcing actions.13 It appears that outsourcing of work —
particularly of work moving offshore — accounts for a small share of layoffs that last
more than 30 days and involve at least 50 workers (excluding those called because
of seasonal work and vacation periods). Of all employees in the private nonfarm
sector let go in extended mass layoffs in 2004, some 9%-11% were displaced in
extended mass layoff events involving domestic and offshore outsourcing; perhaps
12 Ibid. and data available at [http://stats.bls.gov/].
13 The number of actions can be greater than the number of layoff events because one layoff
can involve multiple movements of work (e.g., some work shifting to another facility of the
same company within the United States, some to another U.S. firm, and some to the
company’s own subsidiary in another country).

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CRS-11
3% in events that specifically involved offshoring.14 The jobs of perhaps 3% of all
separated workers were shifted to other countries, principally Mexico and China.
California and North Carolina were the most reported destinations for domestic
movement of work. Typically, outsourcing (either domestic or offshore) took place
within the same company (e.g., a U.S. firm sending work to a U.S.- or foreign-based
affiliate) rather than contracting with another business.15
Most workers separated in extended mass layoff events involving domestic or
offshore outsourcing had been employed by manufacturers, mainly producers of
computer/electronic goods and transportation equipment. Employer restructuring
(bankruptcy, business ownership change, financial difficulty, and reorganization
within company) accounted for a majority of these layoffs as well.
14 The lower bound represents the number of separations connected with specific movement-
of-work actions. The upper bound represents all separations associated with layoffs that
involve some relocation of work. The difference between the lower and upper bounds is
that the latter includes some number of terminations related to movement-of-work for which
firms could not provide detail and some number of terminations not connected with work
relocation.
15 BLS, Extended Mass Layoffs in the Fourth Quarter of 2004 and Annual Averages for
2004.

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