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COMMENTARY: WHO SAYS JOB ANXIETY IS EASING?
Did the Federal Reserve overreact by raising interest rates on Mar. 25? True, the economy has shown exceptional signs of strength recently, heightening concerns that inflation may rear up later this year. But the economy has looked strong several times before in the past two years without causing the Federal Reserve to hit the brakes. Then, Chairman Alan Greenspan argued that widespread downsizing made employees afraid to demand the big raises that would kick off inflation. Lately, however, he has been saying that job insecurity is easing. This was undoubtedly a factor in his support of the quarter-point hike in the federal funds rate.
Problem is, job insecurity hasn't vanished. New figures show that companies are laying off even more than they were a year ago, when worker anxiety hit the front pages. And employees are more worried about losing jobs, according to a new survey by the University of Wisconsin. Given the numbers, "I don't know why policymakers perceive an improvement in worker anxiety," says Jeff Dominitz, a California Institute of Technology economist who co-wrote the Wisconsin survey.
STEADY DRUMBEAT. Just look at the figures on job cuts. Mass layoffs--those involving 50 or more people at a single work site--rose 4% in the last quarter of 1996 over the same quarter of 1995, to 4,480 instances, according to a Bureau of Labor Statistics (BLS) survey released on Mar. 20. The number of workers involved climbed 2%, to 459,000.
Statistics for early 1997 show the same trend. Job cuts in February were 20% higher than in February, 1996, according to Challenger, Gray & Christmas Inc., a Chicago outplacement firm that tracks layoff announcements. On Mar. 14, for instance, H.J. Heinz Co. said that it plans to slash 6% of its worldwide workforce as part of a restructuring (table).
The steady drumbeat of layoffs keeps many workers anxious. Yes, a low unemployment rate and strong job growth have boosted consumer confidence, according to the Conference Board. But the New York business group doesn't specifically ask workers how secure they feel their jobs are, as the Wisconsin survey does. Every three months, the latter asks a random national sample of employees: "What do you think is the percent chance that you will lose your job during the next 12 months?" In the most recent period, ending in January, the average response was 17.5%, vs. 16% a year earlier.
Such layoff fears are likely to keep wage hikes subdued even if the economy continues to strengthen. "Companies are using downsizing to control wage pressures," says John A. Challenger, executive vice-president at Challenger Gray.
AT&T exemplifies the pressures workers face. Although the company's net employment rose by 2,000, to 130,000 last year, it still whacked 8,000 jobs. Many were operators being replaced by voice-recognition technology. AT&T has dumped 55% of its operators since 1990. "The decline will continue," says AT&T spokesman Burke Stinson.
DOWNWARD MOBILITY. That spells job anxiety for folks like Cindy Belanger, 41. An AT&T operator in Plymouth, Mich., she has 24 years experience, a 5-year-old child, and a machinist husband. What she lacks are specialized skills or post-secondary schooling. So even though jobs are plentiful, Belanger knows she's unlikely to match her current salary of $610 a week. "I'll be working two jobs at least if I lose this one," she says.
Her fears aren't misplaced. Only three-quarters of workers who lose a permanent job find any kind of new job within three years, according to an analysis of BLS data by Princeton University economist Henry S. Farber. And on average, the new positions pay 14% less than the old ones. "It's clear that if you lose your job, you're likely to lose income," says Farber.
Greenspan was eager to head off overheating before it happened. But with the job market still in turmoil, his move probably was unnecessary.By Aaron BernsteinReturn to top