The New York Times Sponsored by Starbucks

October 13, 2002

Weak Growth Means Few Jobs, and Pain Is Felt Far and Wide


Almost a year after the economy began growing again, the nation continues to suffer through a broad jobs slump that has spread the pain more evenly than almost any downturn on record.

Few companies have hired significant numbers of new employees, and the worrisome economic signs of the last month have caused some to announce new layoffs, making last year's recession feel to many as if it is still going on. Despite indications that the economy is still advancing and predictions from most experts that it will improve next year, a clear majority of Americans, polls show, think that the economy is either deteroriating or remaining weak.

"The economy is growing, but it feels very disappointing," said Robert J. Barbera, the chief economist at ITG/Hoenig, a technology and investment company. "The job market is moribund."

The weak growth of the last year has made the "jobless recovery" of the early 1990's, which once seemed like a painful exception to previous economic patterns, look instead as if it could be the new norm. Although the economy has become considerably stronger in many ways over the last two decades, with downturns being shallower and coming less frequently, the hangovers they cause appear to endure much longer.

The layoffs of the last year and a half have also been unusually democratic.

Partly because the collapse of the technology bubble of the late 1990's has hurt white-collar workers even more than their blue-collar counterparts, the unemployment rate for college graduates has risen as much since early last year as it has for high school dropouts. Joblessness among whites has increased by about the same amount, in proportional terms, as it has among blacks and Hispanics. In the past, downturns usually hit the most vulnerable workers — the low-paid, minorities and less-educated men — by far the hardest.

Last week, Credit Suisse First Boston added to the white-collar layoffs, saying it would cut another 1,500 jobs, and many of its Wall Street rivals are taking similar steps. The lack of a recovery in technology spending has brought new cuts in that industry, like the 1,350 layoffs that EMC, which sells data storage systems, announced earlier this month, and the additional 10,000 layoffs disclosed Friday by Lucent, the telecommunications equipment maker. The slight weakening of consumer spending has led to job losses at some companies that until now weathered the downturn unusually well.

All that has weakened the job market again, at least temporarily. The number of people on payrolls fell in September for the first time in five months, help-wanted advertising has dropped significantly and the number of unemployment-insurance claims, while volatile, has generally risen.

"I think we're doing terrible right now," said Lorrie Carter, 39, of Warren, Mich., who lost her job assembling drive shafts for Dana Industries, a big supplier to the auto industry, when new orders slowed.

"Factory-wise, there are no jobs out there. I don't think there's even much retail work out there. And that wouldn't pay my bills anyway," added Ms. Carter, who has two sons and was making $14.60 an hour.

In a recent New York Times/CBS News poll, 66 percent of respondents said the economy was in bad condition, up from 39 percent in June. Looking ahead, 39 percent said the economy was worsening and 46 percent said it was staying the same.

"There's not enough indication of any kind of economic recovery" for employers to add workers, said Linda Paulk, the president of Snelling & Snelling, a large employment agency based in Dallas.

David A. Daberko, the chief executive of the National City Corporation, a banking company in Cleveland, added that among his corporate customers, "There's no evidence of hiring or any desire to hire."

Still, barring an unexpected shock, the job market does seem likely to improve, particularly over the longer term. Indeed, if the economy follows roughly the same recovery schedule as it did a decade ago, companies will begin adding more than 100,000 jobs a month by early next year. The fallout from the overinvestment in technology and the stock market bubble could make this rebound less robust, but the labor market is expected to tighten over the next decade, as the advance guard of baby boomers begins retiring and fewer young adults replace them in the labor force.

Already, the unemployment rate — while likely to tick up again for a variety of reasons — fell to 5.6 percent in September, its second consecutive decline. The economy continues to grow at a modest pace, and in recent weeks companies have asked employees to work longer hours, as often happens shortly before new hiring begins.

"There's not another downturn ahead," predicted Lakshman R. Achuthan, the managing director of the Economic Cycle Research Institute, one of the few groups to have forecast last year's recession. But, he said, "we're not talking about gangbuster job growth."

In part, the new face of job cuts — less severe but more long-lasting and widespread than in the 1970's and 80's — reflects the shrinking of the manufacturing sector. In contrast to the booms at the start of past recoveries, when industries hired tens of thousands of production workers to fill new orders, the sector has continued its long-term decline in recent years, as it did a decade ago.

This jobless recovery has its own specific character, however.

Over the last decade, American companies have used new technology and strategies to become more efficient than they were in the 70's and 80's. The change is almost certain to benefit the country over the long term, allowing both incomes and corporate profits to rise. This year, however, the productivity increases have weakened the job market, because companies have been able to lift their output without hiring new workers.

Since last summer, for example, the Clorox Company has reduced its work force to 10,000, from 11,000, as part of its "cut costs everywhere" strategy. To keep sales and profits rising despite the company's new size, it has reduced the number of its bleach products, eliminating some fragrances and package sizes.

The managers of a bleach warehouse in Atlanta and a cat-litter warehouse in Spring Hill, Kan., have also found ways to move boxes onto trucks more quickly. Because raising prices is nearly impossible, "everything we can do to maintain our margins is really important," said Rick McDonald, who oversees the warehouses.

Repeated in similar ways across the economy, the productivity increases will require the economy to grow faster than before to create new jobs.

"We'd probably have to have growth in the next few quarters of above 4 percent to have really rapid payroll growth, and I don't think anyone's forecasting that," R. Glenn Hubbard, the chairman of President Bush's Council of Economic Advisers, said in an interview.

Mr. Hubbard emphasized that unemployment was lower and the labor market appeared healthier than it had been in the wake of other recessions and said he believed that the economy was on track to improve.

For now, however, many white-collar workers, just a few years removed from good salaries and rich benefits that often included stock options, are struggling to find jobs that pay anything close to what they had been making. Data on earlier layoffs suggest that many will not succeed in doing so.

Craig Adams, an accounting manager in Cupertino, Calif., who was laid off early this year, has sat in a few job interviews in which an executive has described being overwhelmed by the response to a job advertisement. "I think the number of choices are fewer," said Mr. Adams, 55, who has a graduate business degreee and was making about $80,000 at his old job, "and I also think there are a lot more people looking for the same positions. What I try to do is keep positive. You have to keep plugging away."

Others have applied to graduate and professional schools, making admission unusually difficult over the last year. Law school applications for the class that enrolled this fall rose 15.4 percent over the previous year, the largest increase since the Law School Admission Council began keeping track.

The recent recession and initial recovery have also reduced some traditional gaps separating Americans of different classes and ethnicities.

For example, the gap between the unemployment rates for the most educated and least educated workers has narrowed substantially since early last year. In February 2001, only 1.6 percent of college graduates in the labor force were unemployed, compared with 7.4 percent of workers who did not finish high school. Last month, the unemployment rate among college graduates had nearly doubled to 2.9 percent, while it had edged up only slightly, to 7.8 percent, among the dropouts. High school graduates with no college also picked up some ground on the holders of bachelor's degrees.

The catch-up by the least educated workers has surprised labor economists. "That's not what people think of as typical," said David Card, an economist at the University of California at Berkeley. "The typical scenario is that the unemployment rate of less-skilled workers is more sensitive to business conditions, and as a result of that, during a recession, the gap would widen. That was pretty much the orthodoxy for the last four decades."

However, he hesitated to call the change a trend yet. "You can't really say for sure that this is the new pattern that we'll expect the next time there's a recession," he said.

During the 1990's boom, black and Hispanic workers, whose unemployment rates have always been higher than the rates for whites, started to gain ground on their white counterparts. That trend has continued through the most recent recession and recovery. "During some recessions, while black unemployment in absolute levels jumps up, the white rate increases faster," said William E. Spriggs, director of the National Urban League Institute of Opportunity and Equality. But for the first time, the ratio of the Hispanic unemployment rate to the white unemployment rate has also fallen during a downturn.

"The employment of Latinos continues even in a down economy," said Roberto Suro, director of the Pew Hispanic Center, a research group based in Washington. "Even when more Latinos are out of work, more Latinos are coming into the economy, finding jobs."

Many experts attributed the narrowing of employment gaps during the boom to the tight labor market, which encouraged employers to dip more deeply into the pool of potential workers and made discrimination more costly. But the labor market has relaxed since then, and now explanations are not so clear. Mr. Suro suggested that Hispanics, especially the many employed in low-end manufacturing and construction, may be living in regions where the downturn has been less severe.

But one traditional effect of the economic cycle has returned. The unemployment rate for women has dipped below the rate for men, a situation that seems to arise only during and immediately after recessions. But this phenomenon may stem primarily from women dropping out of the labor force.

"Women are more likely to become discouraged workers," said Francine D. Blau, director of the Institute for Labor Market Policies at Cornell University. "That probably relates to traditional differences between gender roles in the family."

Different choices of jobs between men and women could also affect their chances of becoming unemployed, Professor Blau added. Even though the economy has fewer factory jobs than it did a decade ago, men are still more likely to hold those jobs than women.

Ultimately, with a work force less concentrated in manufacturing, labor market slumps may last longer. Even before the recession began last year, "you saw manufacturers move very quickly," explained Jeffrey A. Joerres, chief executive of Manpower Inc., the big provider of temporary workers. "You saw technology and office environments say, `I'm not feeling it yet; I'm still in this war for talent; I'm holding onto people.' Then the reality sunk in that it wasn't just manufacturing, it was everything, with the financial markets being last. Instead of being synchronized in all industries, it created a much longer cycle."

Copyright The New York Times Company | Permissions | Privacy Policy