Lack of hiring poses more threat than layoffs

Economists expect the government's key employment report, due Friday morning, will show a net loss of 540,000 jobs in January which follows the 524,000 loss in December. They forecast the unemployment rate to increase 7.5% from 7.2%, which would be a 16-year high. Indeed, January 2009 was one of the most terrible months for layoffs than ever.

Still, experts note that the real problem is not in layoffs, actually it is a hiring freeze what deteriorates the economy. Most recent figures show that the level of hiring and job opening declined much more than layoffs increased. Through November the layoffs rose by 17% above the previous year figure while the number of workers hired during November was down 26% with the number of job openings decreased by 30%.

And while the experts say that the number of layoffs will further be growing they expect the hiring and job openings to remain on a low level within the following months. Economists point out to that the hiring freezing is a more convenient way for the companies to reduce work forces than layoffs.

"The issue of hiring is often overlooked," said Gad Levanon, senior economist for The Conference Board. "But it's the key to the labor market. In the last recession, layoffs reached their peak in late 2001. But hiring didn't reach its lowest level until 2003, and that's when the job losses finally ended."