Lay-offs time-bomb under Britain

BRITISH Telecom, British Airways, Marconi, Enron - the number of large companies announcing big lay-offs in Britain grows daily. Yet so far, ahead of today's latest Government statistics, there has been little official indication of the corporate carnage.

Similarly, in the US an alarming wave of corporate lay-offs began at the start of the year but the corporate downsizing did not show up in the government jobs data until late in the summer. From January until early spring, US companies said they would slash nearly a million jobs but America's jobless rate was still at a low 4.5% as late as July.

Then the situation reversed and between July and October, the ranks of the jobless in America increased dramatically. Of the 700,000 jobs lost in the non-farm sector since the recession officially began in March, 682,000 came between July and October. A further 200,000 lost jobs are expected when the Labour Department, headed by Elaine Chao, reports November's data on Friday. Economists say that unemployment data is a lagging indicator that typically takes many months to shift but once it does, the acceleration - either up or down - can be rapid. The unemployment rate in America surged from 4.4% to 5.4% in less than six months.

'The seeds were planted in the winter and early spring when companies announced massive lay-offs but we didn't really see the rapid deterioration in labour markets until the last three months,' said Mary Bowler, an economist with the Bureau of Labour Statistics. 'Expectations were building that the situation would get bad. Now it is.'

Economists say one reason there is such a long lag between corporate lay-off announcements and grim official data is because in the beginning of downsizing cycles, companies tend to announce the highest number they expect they might have to make redundant in order to get all the bad news out at once.

Some firms, such as Nortel, have announced job losses in several waves but most companies prefer to make one statement at the top end of expectations. It makes investors think the company is making a dramatic response to flagging profits and human resources officials believe it reduces stress on employees to have the bad news delivered all at once, rather than in stages. Many firms announce a level of lay-offs they never actually reach.

Job slashing also takes time to implement. Often, the first to go are those who leave voluntarily, either taking early retirement or moving on to a better job. Additionally, employees who lose their jobs early in the cycle are more likely to find another quickly, and may not be captured as unemployed because their period of joblessness is short.

As the economy deteriorates and unemployment begins to rise, however, the chances of finding another job quickly diminish and a longer-term stay in the ranks of the jobless is reflected in government data.

If the US is any guide, it could be several more months before the British jobs market begins to feel the pinch from the dramatic lay-off warnings from major corporations.

The British economy is still growing, so that will help absorb some of the displaced employees, but if the economy slows, as it did in America, the employment situation could go from bad to worse in a matter of weeks.