Unemployment Surges; Worker Benefits, Morale Deteriorating

Employment deteriorated in February as employers faced greater pressure to cut costs through layoffs and compensation reductions, moves that appear to be taking a toll on the morale of remaining workers.

The unemployment rate surged to 8.1 percent last month, marking the highest joblessness rate in a quarter-century, with losses seen across all sectors, the Bureau of Labor Statistics reported Friday, March 6.

Employers are also looking to trim compensation costs associated with health benefits, a survey released by Hewitt Associates this week showed. The annual survey showed a sharp increase in the number of employers looking to stop offering health benefits in coming years, a move largely attributable to the weak economic outlook.

The sharp rise in unemployment and fears about the state of the economy have begun to affect those workers remaining, according to a separate survey by staffing firm Adecco. Workers fear they might be next to lose their job, and one in five say the economy, while not yet technically a depression, is nonetheless making them feel depressed.

The Labor Department reported that the number of Americans without jobs increased by 851,000 in February to bring the total number of unemployed to 12.5 million. Job losses have totaled 4.4 million since the recession began in December 2007.

The unemployment rate’s half-percentage-point jump in February, to 8.1 percent from 7.6 percent, reflects the worst labor market since 1983, the Labor Department said. Laid-off workers—as opposed to those leaving voluntarily or new workers just joining the labor force—represent 62.3 percent of the unemployed, up from 50 percent when the recession began.

The number of long-term unemployed, those jobless for 27 weeks or more, rose by 270,000, to 2.9 million, in February.

Job losses spanned almost all sectors, with deep reductions in construction, manufacturing and, most heavily, in professional and business services, which shed 180,000 workers, most notably among temporary staffing agencies.

The staffing industry, often the first to be hit by a downturn and the first to recover, continues to see a steep drop in demand for temporary workers. Temporary employment has fallen by 686,000 jobs since the recession began.

The health care industry, however, continued to grow. In February, the industry added 27,000 new hires. That gain was in keeping with its employment trend, the Bureau of Labor Statistics reported.

The deteriorating economy is affecting the willingness of employers to provide health benefits. Nineteen percent of employers say they are moving away from “directly sponsoring health benefits,” up from 4 percent that reported doing so last year, Hewitt reports.

“In this economy you can be a lot more candid with your employees than when they’re job hopping,” said Jim Winkler, a health care consultant with Hewitt.

Winkler anticipates more employers will renegotiate contracts with health insurance vendors and reopen benefits enrollment midyear to save money in the near term.

“Having another enrollment this year is the only way you can materially impact costs this calendar year,” he said.

Workers report a greater willingness to take drastic measures to save their job, according to Adecco. Twenty-eight percent of workers said they would be willing to do something dishonest, like blame a co-worker for a mistake, to keep their job. Generation Y workers were most likely—at 41 percent—to do something dishonest.

Hopes are high among workers that the recently enacted stimulus legislation will be successful. Nearly three-quarters of workers surveyed by Adecco believe the stimulus will provide some benefit to the economy.

Workers appear to be growing impatient, though, to see its impact on the economy, said Doug Arms, chief talent officer for Ajilon Professional Staffing, a division of Adecco. One in five workers say the recession is having a negative impact on their health.

“I think there is more hope that the stimulus package will be helpful, but as the hope meter goes up, the patience meter goes down,” Arms said.