We’re making the recession worse (Editor’s notes)

Hasty layoffs hurt organizations more than economic crisis

In January, Canada lost 129,000 jobs — almost all full time — as the unemployment rate soared 0.6 percentage points to 7.2 per cent. That loss in jobs exceeds any monthly decline during the previous economic downturns of the 1980s and 1990s.

Ouch. But let’s keep things in perspective. After all, 7.2 per cent is not a catastrophic unemployment rate. Yes, there are some very painful individual stories behind the numbers. But, from a big-picture perspective, 7.2 per cent is not apocalyptic.

Just look at the unemployment rate historically. While the rate has certainly bounced around in the last 50 years, there are many years where it was similar to the current rate and more than a handful where it was much higher.

In 1958, 1962, 1976 and 1989 the rate was very close to January’s number. In 1983, it was 11.9 per cent, and didn’t come back to single digits until 1986. In 1991 it went back into double digits, rising to 11.3 per cent in 1992 before falling to 9.6 per cent in 1995.

And the numbers are nowhere near the 27-per-cent unemployment rate Canada witnessed in 1933 during the height of the Great Depression.

So why is the mood so gloomy? Well, some of the finger pointing should be coming my way — not me specifically, but my profession. The 24-hour news cycle means people are inundated with bad news.

This has the predictable effect of spooking both employers and consumers. Employers think something must be done — cut staff, reduce travel budgets, curtail expenses — to show they’re being responsible and preparing for the worst. Consumers, even ones with secure jobs, are frightened and squirreling away their pennies.

This, of course, is making the recession even worse. As people and companies spend less and save more, the economy goes into an even worse downward spiral.

Here’s an example of the lunacy that can accompany an economic downturn. I get my haircut at one of the national chains — a typical drop-in, no-appointment-necessary $15 haircut joint. When I went in last Sunday for a trim, the woman who often cuts my hair looked a bit more frazzled than usual. She told me the day before they were turning away customers because the wait for a haircut was more than two hours — and she had to work frantically to keep up.

It turns out the chain — which is based in the United States — made a blanket decision to cut the number of haircutters in half on Saturdays to save money because of the recession. This may make sense in a Cleveland suburb — I’m not sure — but it doesn’t make sense at the location I go to. It’s just as busy as ever and now, because they are short-staffed, they’re turning people away and leaving money on the table as a result. Talk about taking a little off the top…

The news on the economic front is undoubtedly scary. But for companies still in the black, and for employees with secure jobs, the message needs to be delivered strongly: Keep spending. We need you to get us out of this.

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