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Two years ago, the future looked bright for Donovan A. Martin. Armed with an accounting degree from Atlanta's Morehouse College, Martin landed a job as an accountant with a public accounting firm near Detroit. Earning $22,500 a year, he began paying back his $22,000 in student loans. Even when he got laid off, Martin figured another job couldn't be far off.

Now, one year and a dozen job interviews later, the 27-year-old has found his niche in the economy--at the bottom. Time after time, Martin says, he has been told by the likes of General Motors, Ford, and the Federal Reserve Bank of Chicago that they are in a prolonged hiring freeze while trying to downsize their operations. "The dinosaurs want to be gazelles," says Martin.

Welcome to the 1992 recovery. Although gross domestic product has grown for five straight quarters--albeit at an anemic 1.6% or so per quarter--jobs are scarcer than ever. Indeed, the latest statistics paint a picture of a job market going in reverse: Manufacturing employment plummeted by 97,000 in August, capping three years of almost steady decline. Adult unemployment, meanwhile, hit nearly 7% during the month, its highest level since the early 1980s.

That's why, when Sony Corp. in July announced 100 job openings at its new television assembly plant outside Pittsburgh, some 20,000 people responded. In August, 11 companies in California's Silicon Valley announced layoffs. On Sept. 9, Apple Computer Inc. announced that it planned to cut 345 jobs. And General Motors Corp. now says it is committed to slicing 74,000 jobs by the middle of the decade.

Simply put, more than two years after the recession started, Corporate America is still paring payrolls to try to shore up profits in the face of weak demand. Add in defense cuts and slow growth overseas, and the downward pressure on jobs is almost irresistible.

The outlook isn't likely to improve soon. The economy's weakness and the end of a government summer jobs program employing 88,000 people means that the September employment report, which comes out in early October, may be equally dismal. By Election Day, the unemployment rate could brush 8%, despite the mild stimulus that President Bush planned to offer in a major economic address on Sept. 10. "It looks like this recession has nine lives, and I'm not sure which life we're in at the present time," says John V. Roach, Tandy Corp.'s chief executive.

JADED. The weak labor market has made jobs, or the lack of them, the top issue in the Presidential campaign. "We are concerned for our children," says George Esler of Parkville, Mo., who works at a Pontiac plant in nearby Fairfax, Kan. "We have sons and daughters who are graduating from high school and college, and there are no jobs for them." Some think the weak numbers could work in candidate Bill Clinton's favor. Indeed, Rudolf Hermes of Parma, Ohio, rolls his eyes when he and his wife Barbara are asked about George Bush. "I'm not sure Clinton will be any better, but at least he seems to have a plan." But other voters are simply jaded. Says Fontella Jamison, payroll supervisor at Independence (Mo.) Memorial Hospital: "I really don't think Clinton's economic plan will work any better than Bush's."

Neither candidate can do much about the scariest weak spot in the job market: The potential that job cuts may start feeding on themselves. No new jobs means no growth in household income and spending. And since personal consumption makes up two-thirds of gross domestic product, consumers who can't or won't spend give most companies more reason to fire than hire. "Cost-cutting does make companies more productive," says Lawrence Chimerine, senior adviser to DRI/McGraw-Hill, "but it also hurts the economy because you lose consumers."

To be sure, the great American job machine has not come to a complete halt. "If you take a look at the U.S. and you compare it to the U. K., or anywhere else with the exception of Germany, it's doing pretty well," says Anthony J. F. O'Reilly, CEO of H. J. Heinz Co. Some businesses are still expanding and hiring new workers, and the Fed's recent interest-rate cuts are putting more money into homeowners' pockets. That should eventually spur consumer demand. But while easier money has managed to keep the economy from sinking back into recession, it hasn't yet induced businesses to create enough new jobs to offset ongoing layoffs. And any prospect for aggressive fiscal policy has been hampered by the enormous budget deficits.

That's why many forecasters now believe the economy will eke out only an anemic 1.5% to 2% growth rate in the second half, far below the 3% to 3.5% many had anticipated. And some fear that the economy will dip back into recession. "You could have a very dangerous six-month period," says Norman Robertson, chief economist at Mellon Bank. "Worries about jobs and incomes are overriding the low interest rates."

That's what happened to sales at Tenneco Automotive, a $1.7 billion auto parts supplier based in Lincolnshire, Ill. When business fell off in August, after a strong first half, the company put 6 of its 37 worldwide plants on 4-day workweeks and laid off 300 temporary workers. President John P. Reilly blames the decline on collapsing consumer confidence. "People are worried about their jobs," he says, "so they're putting off things like preventive maintenance."

SHAVED WORKWEEKS. Across the country, announcements of big job cutbacks have become business as usual. In Seattle, Boeing Co., which has already cut about 8,000 jobs this year, recently announced a cutback in production of the 757 jet because hard-pressed airlines are sharply slowing down orders. That will probably mean further job erosion starting next year.

Hewlett-Packard Co., the big Palo Alto (Calif.) computer and instrument maker, is tightening its employment belt as its customers slow spending on computers and instruments. HP is cutting back on temporary employees, and it may put some workers on a "nine-day fortnight," in which people stay home without pay one day out of 10.

While some areas of the country, such as the Northeast and California, have suffered from massive losses in banking and retailing employment, the latest round of job cut announcements have come mostly from manufacturers. The single biggest reason: defense cuts. Since December, 1991, six key defense-related industries--ordnance, aerospace, shipbuilding, missile manufacture, communication gear, and navigation equipment--have lost some 100,000 jobs. That accounts for two-thirds of the fall in manufacturing employment.

Southern California has been hardest hit. The latest bad news: Hughes Aircraft, which bought General Dynamics' missile unit in late August, announced on Sept. 9 that it would cut 4,000 workers employed at the plant. The layoffs probably won't end until the middle of the decade.

Even the computer industry, once one of the nation's strongest, is shrinking fast. In the past three years, it has lost some 50,000 jobs. That's partly a spillover from the slowdown in defense spending. Because defense and other government purchases have slacked off, for instance, Encore Computer Corp. in Ft. Lauderdale, Fla., reduced its work force from 1,800 to 1,200 workers during the past 18 months.

Of course, the computer biz is suffering from more than just the end of the cold war. Employment has fallen as technology drives down size and materials costs. "The industry, as it's generally defined, is a declining work force," says Ronald L. Skates, CEO of Data General Corp., which cut 1,000 jobs this year. "There have been such massive increases in productivity, it takes fewer and fewer people to do the same job."

STEELYARD BLUES. Other manufacturers, too, are finding that boosting productivity in a slow-growth economy means they need fewer workers--and many of those jobs are gone for good. In early September, U.S. Steel unveiled a new $250 million continuous caster at its Mon Valley Works in Pittsburgh. That, says U.S. Steel President Thomas J. Usher, saves 5,000 steel jobs in the city. But when U.S. Steel shifts all operations from the old facility to the new, 200 jobs will be lost. Overall, the steel industry has lost 10,000 jobs over the last year.

Companies can't even count on exports anymore, which were a big plus for the economy in 1991. For now, economic weakness in Japan and Europe means that exports won't help generate many new jobs for U.S. workers this year. That hurts companies such as Cincinnati's Structural Dynamics Research Corp., a maker of mechanical design automation software, which gets 31% of its revenues from the Far East. As some Japanese customers postpone spending decisions, SDRC has had to tighten its belt and put on a selective hiring freeze, says SDRC CEO Ronald J. Friedsam.

The Japanese appetite for U.S. goods may be helped by the big fiscal stimulus package that the Japanese government has just announced. But the news out of Europe is not as promising. With Germany pushing money market rates up to 9.75%, other European nations have had to follow suit, damping growth across the Continent. And the pressure may not ease soon. "Bundesbank action in cutting rates is going to be a lot later than people would like," says Michael R. Rosenberg, head of Merrill Lynch & Co.'s international bond research unit.

Some businesses, luckier or smarter than the others, are bucking the trend and still hiring. Thanks to an increase in demand and the construction of a new mill in Hickman, Ark., Nucor Corp., the Charlotte (N. C.)-based steel minimill operator, has added about 200 workers this year and will add 100 more before yearend. Also expanding is AutoZone Inc. of Memphis, Tenn., a do-it-yourself auto parts retailer. When AutoZone went public in February, 1991, it operated 550 stores. By the end of its fiscal year on Aug. 29, the store count was up to 678 and the employee total stood at 12,000. The company plans to add 100 more stores and boost employment by a further 1,500 over the next 12 months.

Some companies are even benefiting from the weak job market. Dallas-based CompUSA Inc., the nation's largest operator of computer superstores, plans to add 20 stores and 100 employees this fiscal year to the 29 outlets already open. CEO Nathan Morton attributes part of CompUSA's success to the downsizing of big companies: "When they lay off, some of these people start their own business, and small businesses are a big part of our customer base."

Housing, too, may provide jobs, as the housing market responds to the lowest mortgage rates since the early 1970s. The Mortgage Bankers Assn. reports that mortgage applications to buy homes are up by a third since June. And home sales at Centex Corp., the country's largest homebuilder, are up 65% in the quarter, says CEO Laurence E. Hirsch. The company's backlog at the end of August was 60% higher than a year ago. "We're looking for probably the second-best year in our history," says Hirsch.

RAINY-DAY MONEY. But the big drop in interest rates engineered by the Federal Reserve over the past three years has not been able to pull the labor market out of its slump. For sure, many homeowners have cut costs by refinancing their mortgages, but the lower rates have also cut $30 billion off consumers' interest income.

Even when they do have more money in their pockets, the fear of job loss makes consumers reluctant to spend. Take Larry Fiset, a 37-year old machinist with Raytheon Co. who is refinancing his Westford (Mass.) home. His job is protected by 17 years of union seniority, but last March, his wife was laid off and went without work for two months. She eventually took a job for much less pay than her last one. "There are going to be no big purchases," says Fiset. "We're saving the mortgage money in case something happens, in case my wife loses her job."

Corporations, too, are being cautious in their capital spending. Lower rates have allowed corporations to boost their profits by 12% over the last year, says the Commerce Dept. But commercial and industrial loans are down $20 billion since the beginning of the year and still falling. The problem isn't high rates. "It's not an inability to hire and invest," notes Mark Zandi, an economist at Regional Financial Associates. "It's an unwillingness, a lack of confidence that demand will be there."

There's growing doubt that monetary policy alone can restore that confidence. With the federal funds rate at 3%, "there are only three bullets left in the gun," says David A. Wyss, an economist at DRI/McGraw-Hill, "and the last 24 bullets haven't done much to get the economy going." A growing chorus of economists and business leaders is urging a federal program to revive the economy. If the job picture continues to deteriorate, the next President, whoever he is, may have to heed the call.

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