Sitting Pretty Or Running ScaredKathleen Madigan
Timothy S. Wyant didn't much enjoy his Labor Day weekend. Two weeks earlier, the AT&T long-distance operator learned that his office in Amherst, N.Y., will eventually be closed. Now, he's waiting to hear if the company will transfer him. If not, Wyant expects to collect unemployment checks for a long time. His terse take on the situation: "It sucks."
Wyant is not alone in his bitterness. On Sept. 3, just as thousands of vacationers were packing up the minivan for summer's last weekend, the Labor Dept. reported that nonfarm payrolls fell 39,000 in August, with continued widespread layoffs in the factory sector. Earlier in the week, the Conference Board's August survey of 5,000 consumers struck a similarly dark note: 41.1% of those surveyed considered jobs "hard to get," a higher percentage than during the 1990-91 recession (chart).
Curious, though: Even as companies were reporting job cuts in August, consumers themselves told the government that they had found 409,000 new jobs. Many joined the ranks of the self-employed, or were hired at a business too small to be included in Labor's payroll survey. But those extra jobs shaved the unemployment rate by a hair, to 6.7% from 6.8% in July. And despite the August dip, nonfarm companies have created 1.2 million new jobs so far this year, more than the one million added through all of last year. Economists expect job growth in 1993 to be the best since prerecession 1989.
The economic data tell two starkly different stories, reflecting a U.S. work force whose expectations are increasingly split by the economy's modest but uneven performance. On one side, there are millions who aren't much concerned about losing their jobs. On the other, at least as many either have been laid off or are petrified of the possibility.
NOT ENOUGH GROWTH. For the first group, these are good times, indeed. "Workers that have the luxury of secure employment are making out like bandits" in today's economy, says Jeff K. Thredgold, chief economist at KeyCorp. in Salt Lake City. "Minimal inflation means their dollars buy more, they can refinance or buy bigger homes, and they can bargain for products with more clout than they have ever had in the postwar era."
But for thousands of others, the threat of layoff hovers like the sword of Damocles. Why the jitters? Frank Levy, a professor of urban economics at Massachusetts Institute of Technology, points out that "the economy is not growing fast enough to provide jobs for everyone who wants one." So, he argues, the U.S. is still in recession in terms of job growth. Moreover, highly publicized layoff notices--such as Southwestern Bell Corp.'s Sept. 7 announcement of 1,500 impending pink slips--don't help to quell the anxieties workers feel.
As a result, some consumers are taking defensive action. With the prospect of unemployment looming, AT&T operator Wyant already has limited his spending. He canceled plans to buy a new truck and must soon tell his two daughters that a hoped-for trip to Disney World next year won't happen. He had also planned to build an addition to make room for a third child. Now, he doubts he'll build the addition--or try to have another baby.
DEFERMENT DAYS. Rachel Grossman is cutting back, too. The 28-year-old University of Denver nursing student spends Sunday mornings scouring the want ads looking for a part-time job. In the meantime, she eschews vacations, buys clothes in second-hand shops, and goes to movie matinees because they're cheaper than the evening shows. "Postponing things is a way of life," she says.
Consumers with steady paychecks, though, haven't postponed enjoying the windfall of a weak economy. Fixed 30-year mortgage rates below 7% have opened up a flood of refinancings for homeowners who can meet the income requirements. And cheap vacations, cars, and computers can be had by consumers with the cash or credit.
Moreover, because companies aren't hiring, hourly employees are picking up extra money by working overtime. The average workweek in the nonfarm sector increased by 12 minutes last month, to 34.7 hours, while overtime in the factory sector extended to 4.2 hours, equaling its record high in May. With more hours, weekly pay for all nonfarm workers jumped 1% in August, to $377.19.
The use of overtime in place of hiring is especially widespread on the factory floor, where almost 200,000 jobs have been lost this year even though output has risen at a 3% annual rate. Darrell Reider, a supervisor at battery maker East Penn Manufacturing Inc. in Lyon Station, Penn., decided to miss a Penn State home football game for the first time in two years in order to work overtime during the Labor Day weekend. Reider figures he made about $125 working the 5-hour shift while his alma mater trounced Minnesota, 38-20. "I love Penn State," Reider says, "but the decision for me was, grab the money."
The confidence split probably isn't irreparable. Economist Thredgold, for one, predicts improvement by next year, as layoffs at big-name companies ease and steady payroll increases return. Until then, though, angst-ridden workers may delay big-ticket purchases and keep domestic demand in check. That could limit economic growth in the second half to its current modest rate of 3% a year.
Even some workers who are winners in this slack hiring environment aren't gobbling up the spoils as hungrily as before. Reider, for one, can't bear to miss two Penn State games in a row. He'll forgo overtime to catch the Sept. 11 clash with Southern California. Some things are more important than money.