Work & Family: Savaged by the Slowdown

How families are coping--or not--with the fallout

Until the downturn, 40-year-old Steve Jackson's blood pressure was an ultralow 105 over 60. After surviving a plane crash in 1984, in which his United Air Lines 727 hit a radio tower on takeoff and ripped the fuselage under his seat, he nonchalantly boarded the next available flight. Seemingly unflappable, his family and friends thought of him as a cool-hand Luke.

Until the night of Feb. 15, when Jackson stared at the news on the computer screen in his cluttered Chapel Hill office and couldn't believe what he saw. Jackson, a university research coordinator for Nortel Networks Corp. (NT ), had always thought of his Nortel options as a reward for the lean years when he and his wife lived in a two-window dump so dark it killed the plants. But news that Nortel would miss earnings was sending the stock into a tailspin, one that ultimately wiped out his one-time, million-dollar fortune and left him with a $400,000 tax bill on money he would never see. Turns out that by hanging on to the shares after he exercised the options instead of selling, Jackson had triggered the alternative minimum tax. That move, in turn, ended up destroying his kids' college savings and the family's net worth.

At first, Jackson had trouble keeping food down. Then he couldn't sleep. Acne sprouted all over his face. His doctor prescribed Valium, which Jackson says he ate "like M&Ms." To cope with the debt, he took a second mortgage on his house, which he says he'll be lucky to keep, and another job as an electrician's assistant on the night shift, paying $20 an hour. "It's like Kafka," says Jackson, who worries when his phone rings that it's a layoff call. "Work-family balance? I have no balance. From the moment I wake up till I fall asleep, this problem consumes me."

The downturn has done plenty of damage, ravaging market caps, decimating earnings, and extinguishing all sorts of entrepreneurial dreams. Less visible has been the slowdown's effect on families. As companies gear up for what is predicted to be a third round of job cuts this fall, economists say unemployment could rise to 5% by early next year.

"FANTASY WORLD." Not that those who are still employed are without their worries. Businesses across the country are saddling their reduced ranks with bigger workloads, causing stress levels to spike beyond their boom-time levels. They are also cutting bonuses, which will likely leave many families strapped, having financed their luxury lifestyles on the extra compensation. Already, some boomers are angry about being unable to afford retirement, while many elderly are disappointed about derailed plans to move into posh, concierge-equipped retirement communities. These downbeat expectations for the near term appear to be catching on with consumers, who sent the Conference Board's confidence gauge down two points in August to a two-month low. "Almost any market indicator you look at points to significant and increasing amounts of stress on households," says Mark M. Zandi, chief economist at researcher "And I get no sense that it's going to come to an end anytime soon."

Employee assistance and outplacement professionals say this dampened outlook, coupled with dwindling severance packages, are causing new and disturbing tensions among employees and their families, especially now that Corporate America's paternalism has largely vanished. "The downturn is now hitting them very hard," says Richard A. Chaifetz, chairman and CEO of Compsych, the world's largest privately held employee assistance firm, whose clients include American Express (AXP ), J.P. Morgan (JPM ), and Krispy Kreme (KKD ).

Indeed, Chaifetz says Compsych is receiving record levels of calls for help from employees and their families. Since the downturn, counselors say they have seen a marked increase in "crisis calls" involving problems such as online affairs, addictions in adolescents, and spousal abuse (which counselors say is occurring more and more against men). "People feel like they had the rug pulled out from under them," says Chaifetz. "They were living in a fantasy world."

Now, they're finding out how harsh reality can be. Sure, plenty of families stashed it away during the boom, protecting themselves from the economic whiplash. Others, who haven't suffered a layoff or a big economic reversal, are humming along just fine. In fact, these sorts of families have helped support what until recently has been a surprisingly upbeat mood among consumers. But's Zandi warns that the number of families feeling the strain may well grow over the coming months. That's largely because Americans are sitting on huge piles of debt. Delinquencies on car loans and credit cards are at or near record levels, as are those on mortgages for lower-income homeowners. Household debt service has also hit an all-time high, along with personal bankruptcies (charts). And for those who still have jobs, their incomes, hours, and bonuses, like those of executives at Ford Motor Co. (F ) and Sun Microsystems Inc. (SUNW ), are being cut.

These financial troubles are not being lost on companies. Human resource professionals figure that when workers worry about family finances, they waste 13% of the workday on calling creditors and other distractions. Money woes also lead to medical problems, lower productivity, more absenteeism, and accidents. Indeed, research shows that family members who survive a layoff face workplaces that are more stressful, political, and cutthroat than before the downsizing, leaving them with even less time for family. Some employee assistance firms have added financial counseling, as well as survivor seminars, to their offerings to help workers cope.

Nowhere is that help needed more than in the Bay Area, where the jobless rate has jumped from 1.7% in January to a recent 4.7%. During the boom, the lines at Frankie Johnnie & Luigi's in Mountain View, Calif., were two blocks long, filled with dot-commers celebrating stock prices over the sausage bread and salami strombolis. Today, only a small clump waits to get in. Instead, the long lines are forming across the railroad tracks at the nonprofit food bank, Community Services Agency.

PRIORITIES. Each morning, about 75 or so laid-off high-tech workers line up for the 10 a.m. opening, when they can get bread, butter, and milk--when it's available. Last year, most of the agency's clients were low-income workers who showed up in their fast-food uniforms. Today, it's laid-off dot-commers in khakis, especially single parents and those fresh out of college. "The kind of people we're seeing has drastically changed," says the agency's executive director, Tom Myers.

Some who have suffered huge reversals are finding the crisis can help them set new priorities, like the ex-dot-com CEO who postponed having kids during the boom, only to realize now that she really does want a family, even though she and her husband lost their millions and can barely afford the rent. But mostly, the newly jobless and suddenly unwealthy are distressed, and they are flocking to newly formed support groups, like Transitions at Mountain View's St. Timothy's Episcopal Church. Members participate in role-playing exercises, where some of the downturn-induced family pressures are vented and worked through. Leading the sessions is James Thomas, a minister and Jungian analyst who likens the pain of the families he sees to those he counseled in the 1980s through the Oklahoma oil crisis, when the suicide rate got so high the state started a gun-giveback program. "People held on for a couple of months in Oklahoma before they crashed and burned," Thomas says. "It's deja vu here."

ANGRY AND AFRAID. Group member Ivan Temes, who has had a 30-year career in Silicon Valley in customer support at stalwarts such as Levi Strauss & Co. and Apple Computer Inc. (AAPL ), has no trouble believing that. Temes has been laid off before, but the most recent downsizing, from Internet privacy company Privada Inc., was the worst, coming with no warning, no benefits, and no severance. His wife is angry and afraid, especially since the family has run through its savings and Temes recently called about food stamps. Their 6-year-old son, Joshua, also feels the financial fear. Recently, when Temes was on the way out the door, he recounts, he needed some change and asked Joshua for a quarter. Running out of his room, Joshua waved a bill in his hand, shouting excitedly, "Here, Daddy--here's a dollar." Says Temes: "He gets what is going on."

Temes is hoping his next job will last long enough for the family to regain its footing. But with hiring-and-firing frenzies part of the new employment landscape, getting a new job doesn't mean the end of uncertainty. No one knows that better than George deWalder, a specialty-materials manager in Mocksville, N.C. The 55-year-old has been a casualty of serial layoffs, losing 9 jobs in 10 years, a volatility he says nearly ruined his relationship with his 23-year-old son. He also blames the downsizings for playing a role in the end of his 28-year marriage to a woman he still loves but who couldn't take the roller coaster. "I wouldn't wish her on me, either," he says. It didn't make things any easier, he adds, that she worked for SAS Institute--a company that never lays off workers. "In all my times of job hunting, I've never seen it this bad," deWalder says. Lately, he says, he has begun to ask himself: What's the point?

Others, who made and lost fortunes, who got and lost promotions, who were and then weren't CEOs, are asking themselves the same question. For many families in the downturn, all the euphoria on the way up is being followed by equal doses of pain on the way down.

By Michelle Conlin in New York

    Before it's here, it's on the Bloomberg Terminal.