October 2023 NC Economy Watch: Despite Recent Plant Closures, Layoffs Remain Relatively Uncommon

Welcome to the October 2023 edition of NC Economy Watch: an update on what’s happening in the North Carolina economy and what it means for you, brought to you by the Labor & Economic Analysis Division (LEAD) of the NC Department of Commerce.

In this edition of NC Economy Watch, we look at layoff activity in North Carolina. Recent plant closures have rocked local communities and dominated headlines across our state. While these mass layoffs might reflect weakness in parts of the manufacturing sector, they have had only a limited impact on statewide employment statistics and, so far, they do not appear to be signaling a recession.

Despite Recent Plant Closures, Layoffs Remain Relatively Uncommon

On the morning of August 26, 2023, hundreds of furniture workers at Mitchell Gold + Bob Williams learned that their jobs had been abruptly terminated. This shocking news came on the heels of layoff announcements from Klaussner Furniture earlier in August and the Canton paper mill in March. 

Plant closures can disrupt the lives of workers and destabilize the communities where they live. Mass layoffs, if sufficient in number, may also portend a downturn in the broader economy. We often learn of these layoffs from Worker Adjustment and Retraining Notification (WARN) Act notices, which are widely covered in the news media.[1]

WARN notices are typically issued well before economic numbers from the US Bureau of Labor Statistics are released and, in theory, they could be used as a leading indicator of the widespread job losses that accompany a recession. In practice, while WARN notices play an important role in providing workers and communities advanced notification of impending layoffs at individual worksites, they are of limited value as a signal of an approaching recession or as a measure of economic conditions overall.

Figure 1 below illustrates why WARN notices offer an incomplete depiction of layoff activity. The first thing to note is that the number of jobs impacted by WARN notices represent a tiny fraction of all layoffs and discharges in North Carolina—only around 1%—a number so small that we need to graph these data on two separate vertical axes. (Numbers on the left of Figure 1, ranging from 0-500,000, represent layoffs or discharges throughout the state, while numbers on the right, ranging from 0-9,000, represent only those layoffs reported by companies through WARN notices.)

Figure 1

The second thing to note is that WARN notices are issued at a highly irregular frequency. While the number of jobs affected by WARN notices tends to move up-and-down with the broader economy, it can spike suddenly due to mass layoffs at individual plants, such as those caused by the Rocky Mount QVC facility fire in December 2021 and the Canton paper mill closure in spring 2023. These events had a significant impact on individual communities, local employers, and workers who lost their jobs, but little impact on statewide employment statistics. Finally, when excluding these one-time events, we see that WARN notices and layoffs overall remain relatively uncommon; both series are trending at or below their 2019 levels.

These plant closures don’t necessarily signal a recession is on the horizon. That said, the challenges faced by companies can sometimes reflect weakness in particular industry sectors. For example, the Institute for Supply Management’s measure of nationwide activity in the manufacturing sector declined in September for the 11th consecutive month as consumer spending slowed and demand for manufactured goods softened. Employment in North Carolina’s manufacturing sector has been treading water for the past 12 months even as other sectors have continued to grow at a healthy clip [Figure 2]. For now, at least, whatever weakness that exists in the manufacturing sector has not led to a downturn in the economy as a whole.

Figure 2

There’s a reason why economists seek out indicators like WARN notices that could potentially signal an approaching recession: economic downturns often result in widespread hardship, and if we can predict when the next recession will arrive, we might be able to limit the resulting damage. Unfortunately, recessions are neither predictable nor preventable.

Although recessions are difficult to spot ahead of time, once we are in a recession, the signs will be hard to miss: consumers will stop spending money, industrial production will grind to a halt, employment will decline, and the unemployment rate will rise. Chances are, you won’t even need an economic indicator or a fancy statistical model to tell you when the economy has entered a recession. You’ll know it when you see it.

For inquiries and requests, please contact:

Meihui Bodane, Assistant Secretary for Policy, Research and Strategy

NC Department of Commerce, Labor & Economic Analysis Division (LEAD)

mbodane@commerce.nc.gov