Numbers Do Lie. Just Look At UnemploymentChristopher Farrell
In a recession, unemployment goes up. With that well-known business-cycle fact in mind, November's 6.8% unemployment rate is neither surprising nor ominous. After all, joblessness has averaged almost 8% during the past five recessions. That's one reason why President Bush, when he was questioned on Dec. 6 about the big drop in November employment, preferred to focus instead on the relatively mild unemployment rate.
But talk to neighbors, co-workers, or corporate recruiters about the job market, and they will all tell you the same thing: It's terrible. They're rightand the President is wrong. "The unemployment rate dramatically understates the pain, the distress, and the amount of unemployment out there," says Lawrence Chimerine, who is senior adviser to DRI/McGraw-Hill.
It's tough even on the lucky ones who avoid unemployment by scrounging up temporary work. Just ask Ferris B. Mack, a 36-year-old New York insurance broker. Laid off, he had been looking for a job for about a year before he found a temporary spot at Equitable Life Assurance Society in August. The work will probably last through April. Mack has looked for a permanent job in London, Boston, Chicago, and Atlanta. He has also tried to break into other industries. "But I'm hearing the same story throughout the country," he says. "Things haven't picked up, and in some cases they're getting worse."
PAINFUL ADJUSTMENT. Clearly, one reason for the disturbing discrepancy between mounting fear and the mild unemployment rate is the 20% increase over the past year in the ranks of part-time workers who want full-time jobs. Another lies with the slow growth of the labor forcethe number of people gainfully employed or actively seeking a job. Thus far in the 1990-91 recession, the labor force has been growing at an anemic 0.4% rate, compared with its growth over the long haul of 1.8%. Simply put, a lot of people have stopped looking for jobs during this recession. And the government no longer counts these dropouts as unemployed or as part of the labor force.
Indeed, the national unemployment rate, after adjusting for normal labor-force growth, rises to a hefty 9.5%, estimates Paul Getman, economist at Regional Financial Associates Inc. By comparison, during the 1981-82 recession, the official unemployment rate peaked at 10.8% and the "adjusted" unemployment rate only rose an additional 0.3 percentage points, to 11.1%. Why do people drop out of the work force? For many reasons. This time around, a lot of men in their 50s and early 60s have voluntarily or involuntarily taken early retirement. Some younger people, aware that job prospects are bleak, are back in school. Other workers, stuck in depressed parts of the country, such as New England, or with a resume tied to a shrinking industry, are among the discouraged who have quit looking for work, says Getman (chart).
Many more may join this army in the months ahead. "Corporate restructuring," a Wall Street euphemism for management's recognition that it must fire people, is all the rage, especially in such service industries as insurance, banking, and retailing. "Many service-sector jobs are gone for good," says Richard B. Berner, an economist at Salomon Brothers Inc.
Many laid-off workers will find part-time or temporary employment. But it's going to be a slog for them to find full-time positions in a downsized economy. "I think a lot of them are permanently unemployed, unless they take a step backward into a lower-level job," says Sanford Rose, chief executive of Sanford Rose Associates, an executive-search firm in Akron.
ROUGH PATCH. Today, self-employment may be less a paean to entrepreneurship than another profile in discouragement. "I think a lot of people who lose their job become 'self-employed' in order to maintain their social status," says A. Gary Shilling, head of an economic consulting firm. Even the self-employed with busy work schedules typically face lower income and less security.
Take Manhattan's Kelly Weber. She's currently a merchandising consultant to manufacturers such as Perry Ellis Shoes that want to start up their own specialty stores. It wasn't always so. A 21-year retailing industry veteran with the likes of May Department Stores Co. and Saks Fifth Avenue, Weber first hit a rough patch in 1985. Fired after six months at one job, she signed on with Brown Shoe Co. to run Etage, a new chain of accessory and cosmetics stores. But 3 years later, Brown restructured, and Weber found herself on the street, albeit with a nice severance package. Next stop, Bonwit Teller. Another severance after the parent company, Australia's Hooker Corp., went belly-up. Then, Pyramid Group, which bought the Bonwit name, hired Weber but later scrapped its ambitious plans. This time, no severance, just 60 days' notice. That was seven months ago. "I feel like a war veteran," she says. "I really want to feel settled, as opposed to being in this limbo land."
Limbo land is not evident in the unemployment rate that President Bush cites as evidence that things aren't so dire. But the pain lurking behind the statistics augurs ill for the economy.