If you're a company with 100 or more employees and you plan to reduce your workforce, you must alert the government and give your employees 60 days' notice under a law called the WARN Act.
The Dallas Fed said the notices were intended to give workers time to adjust to news about layoffs, but they could also reflect “structural changes” in the economy.
Luis Torres is a senior business economist at the Dallas Fed and recently co-authored a study on warning notices and mass layoffs here in Texas.
He joined The Texas Standard to explain what this increase in warning notices means for the Lone Star State's economy. Listen to the interview above or read the transcript below.
This transcript has been lightly edited for clarity.
Texas Standard: Well, as you're tracking these WARN termination notices, do you see any patterns?
Yes, it is. We are seeing a pattern where more and more white-collar, scientific professional, and technical services jobs are coming from elsewhere. These are areas that have expanded significantly during the pandemic. Additionally, many of these sectors that have seen an increase in WARN notices are interest rate sensitive and have been negatively impacted by reduced business and capital investment.
Well, there are some things to talk about when it comes to macroeconomic factors. But I would like to ask if there is a geographic breakdown here. So you mentioned some of the industries that you think are involved. But when you look at a map of Texas, doesn't it seem like there are certain areas that are hit harder by layoffs?
yes, I have. And then there's Austin. Austin accounted for about 20% of her total WARN layoffs in the state during her first 10 months of 2023. Yet, it only accounts for about 10% of jobs in the state. That's why it's increasing.
Very interesting. Now, I know there was a report just recently that suggested that inflation was slowing down a little bit. Will that be a key factor in future layoffs and the health of these hardest hit industries?
So, if you are in an interest rate sensitive sector and interest rates start to fall, it will definitely benefit your sector. Example: housing market. One of the sectors that we've seen so far is a significant sensitive sector, and we've seen that impact in the Texas housing market.
Yes, that's interest. As inflation declines, nominal interest rates should follow suit. And this is a positive for sectors that are sensitive to changes in interest rates.
In the first year of the pandemic, here in 2020, there were about 200,000 mass layoff warning notices in Texas, which may seem like a lot, according to data from the Texas Workforce Commission. Masu. And then the big drop happened. Is there any explanation as to why?
In other words, it reflects the economy, right? We talked earlier about how WARN notifications can signal structural changes. However, they can also exhibit cyclical changes, such as economic ups and downs.
What happened during the pandemic is that there was a negative shock in the first two months of this year, especially in March and April starting with the months of 2020, with an increase in unemployment and a decrease in employment. Ta. This was also reflected in WARN's staff reductions. That negative shock that affected the Texas economy was due to the pandemic.
Well, let's take a look at the latest warning notices you've covered over the past year as an economist. What does it tell you about the general direction of the Texas economy?
In other words, we are back to pre-pandemic levels. Unsurprisingly, the number of WARNs has increased significantly following the pandemic. But think about what happened in 2021 and 2022 and the strength of the Texas economy right now. Employment is increasing at a very high rate and the demand for labor is increasing. All of this was positive. And that is reflected in the fact that warning notices have reached historic lows.
So what are we looking at now? WARN notifications are increasing and returning to pre-pandemic levels. And what we expect is an increase in unemployment.
Now, you just said that the unemployment rate is expected to rise. Currently it is about 4%. So, if I understand correctly, should we expect that number to increase as we enter 2024?
Therefore, if these warning notices continue and the economy continues to slow, unemployment could increase.
You just mentioned that the employment rate is 4.1%. But consider how much it was a year ago. It was lower, probably his 3.9%. However, we can also see an increase in the unemployment rate, as the WARN notice also shows an increase in the unemployment rate.
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