U.S. Recovery Fails to Pay Off in Job Market

The U.S. economy appears to be growing briskly these days, but the national recovery has a gaping hole in it: Jobs, for many the true sign of prosperity, remain distressingly scarce.

The paradox of layoffs amid growth has varied roots, including a cost-cutting vogue that has spread through corporate America, ongoing foreign competition in manufacturing and service industries and the lingering effects of the recession.

Yet the meager employment outlook isn’t entirely bad news, analysts say. For all the anguish it causes right now, they say, the economy will emerge stronger one day as bloated enterprises are transformed into more productive ones.

Still, some economists worry that the ongoing barrage of highly publicized layoffs could jeopardize the recovery, eroding recent gains in consumer confidence and causing new problems for the Clinton Administration.

“It’s taken on a life of its own,” said Irwin L. Kellner, chief economist at Chemical Banking Corp., of the job-cutting vogue that has gripped many large firms.

The economy’s contradictions have come into sharp focus in the last few days. The government reported Thursday that the economy expanded at a brisk 3.8% pace in the final three months of 1992, but at the same time, a Who’s Who of corporate America has continued to announce job cuts, including Sears Roebuck & Co., Boeing Co. and IBM Corp.

Sluggish job markets are typical early on in recoveries as employers await convincing evidence that the economy has genuinely turned around. But the current recovery, almost two years old, has proved to be different.

Most employers have stayed on the sidelines in response to pressures that range from heavy debt loads to bruising competition, both domestic and foreign, to a new appreciation of the productivity gains that can come from squeezing their work force.

Taken together, these forces are exerting intense pressure on President Clinton to create new jobs, despite opposing pressure to cut the federal budget deficit.

“Nobody would disagree that companies should be as lean and mean and efficient as possible,” Kellner said. “But each company working in its own best interest hurts the national interest by preventing jobs growth.”

Statistics underscore the peculiarities of today’s employment picture. Since the national recovery began in April, 1991, payroll jobs have increased a paltry 0.3%. That contrasts with an average gain of 6.5% at the same stage of prior recoveries.

The national unemployment rate, meanwhile, has been stuck above 7%. In California, it is a more punishing 9.7%.

In light of such realities, analysts are asking whether current economic growth rates can be sustained.

“Either consumers are going to get panicked because of the job market and cut back their spending, or business is finally going to say: ‘We’re as lean and mean as we can “ said Daniel J.B. Mitchell, a labor economist at UCLA.

While many experts blame the flat employment picture on long-brewing business trends rather than the recession, some maintain that the slump has indeed contributed to the problem.

The uneven nature of the recession and recovery--each rolling through some industries and geographic regions much more forcefully than others--may have reinforced employers’ usual anxieties about the state of the economy, inhibiting new hiring plans.

In addition, the slump may have intensified a “downsizing” trend already spreading through corporate America. Even in the 1980s, most new jobs came from dynamic, small employers, while their bloated counterparts often chose to cut back.

As business conditions deteriorated in the early 1990s, larger employers have accelerated their cuts. “Recessions matter,” Mitchell said. “They intensify problems that were already evident.”

A survey by California Job Journal late last year, for example, identified 75 companies that eliminated 60,822 jobs in the last three months of 1992--and anticipated cutting 30,046 more early this year.

The firms included those providing jobs in aerospace, retail, manufacturing, communications and entertainment, according to the Sacramento-based publication. “And the unfortunate reality is that most of these positions will not come back for years, if ever,” said publisher Kathy Masera.

The good news is that more efficient companies are better positioned to survive the competitive challenges of the future, analysts say. The weak job market has also helped restrain inflation, another factor that bodes well for the economy.

But the layoffs pack a punch that hits unaffected households as fear spreads about who will be hit next. On top of that, the wave of layoff announcements is unraveling a bond of trust that once existed between many employers and employees, further eroding confidence in the economy.