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In a temporary layoff, an employer “suspends” an employee’s job, generally because of slack demand. Both the employer and the employee expect their relationship to resume when economic conditions improve. The employer may even help the employee apply for unemployment insurance benefits so that he or she is more likely to wait out the layoff instead of taking another job.When layoffs are temporary, subsequent recalls can take place quickly, fueling fast payroll growth.
By contrast, a permanent layoff severs the relationship
between the employer and the employee. The employer
eliminates the job for any of a variety of reasons, including a
permanent fall in demand, technological change, reorganization of production, and local or international outsourcing. Even an employer that ultimately decides to fill the job again will need to search for a new employee.
Together with our findings on temporary layoffs, it suggests that the two most recent recessions were more strongly structural than recessions past.