Jobless spiral may define a generation
The wave of layoffs that pushed unemployment last month to its highest level in more than a quarter of a century is giving American workers a new jolt of anxiety.
Capping a week of steep stock market declines, new fears for the survival of the country’s biggest automaker and fresh concern over the banking system, the news Friday that unemployment jumped to 8.1% in February from 7.6% the month before was only the latest sign of continued deterioration in the economy.
“We still haven’t hit bottom yet. That’s the hard reality,” said Diane Swonk, chief economist for Mesirow Financial in Chicago.
February was the third straight month in which more than 650,000 workers lost their jobs, the Labor Department said after revising the job-loss numbers for January and December sharply upward.
Since the recession began at the end of 2007, 4.4 million jobs have been lost, with more than half the losses coming in the last four months.
The layoffs have been pervasive, magnifying their effect on the psyche of consumers and contributing to a downward spiral in their spending, which accounts for about two-thirds of the nation’s economic activity.
For most of today’s workers, who were too young to be in the labor force in 1983, when unemployment last reached its current level, the effects could be long-lasting.
“This is something that will redefine a generation,” Swonk said. “There’s no escaping that.”
That demographic’s economic anxiety is unmistakable.
Jay Cooney, a 26-year-old editor for a cable-TV show and an aspiring filmmaker, said nearly all of his friends were stunned by how high unemployment was.
“I’m lucky to have a job, I know that,” he said. “My roommate has a college degree and hasn’t had full-time work since August. He can’t even get a job at Best Buy.”
Susan Glogovsky, a 30-something director of design at Carnoustie Sportswear in Irvine, has cut back on her spending after seeing companies in her industry go out of business and several of her friends lose their jobs.
Although her small employer has avoided layoffs, she lost a freelance side job for a private-label apparel company after its primary customer, Mervyns, went out of business.
“Everyone’s frightened,” she said, describing a big change in her social life.
“Instead of going out for extravagant dinners like we used to, we’re having dinner parties where everyone pitches in $10,” she said. “You don’t normally charge your friends for dinner but we still all want to hang out. And you can’t spend $200 to have a dinner party anymore.”
President Obama, visiting Columbus, Ohio, on Friday to promote his stimulus package, called the pace of job losses “astounding” but urged people to give the planned outpouring of federal spending a chance to work through the economy.
“This recovery plan won’t turn our economy around or solve every problem,” Obama said. “All of this takes time, and it will take patience.”
The stimulus package is expected to take six to eight months to begin to have a significant effect.
Most economists still predict that the decline in overall economic activity will slow and then bottom out in the coming months. But many warn that the recovery that follows will be an unusually long process.
The sliding stock market isn’t helping matters. Although it stabilized Friday, the Dow Jones industrial average this week tumbled 435 points, or 4.2%, on continuing fears about the financial system and the overall economy. Also pushing down share prices were renewed worries that General Motors Corp. could be headed for bankruptcy.
The broad Standard & Poor’s 500 stock index lost 7% this week.
In this recession, layoffs have hit blue-collar and white-collar workers alike, all regions of the country, rural areas and urban areas, and every sector of the economy except health, education and government.
Some earlier downturns, however, spread the pain more unevenly.
The recession of the early 1980s, for example, was concentrated among manufacturing workers and in the Great Lakes “Rust Belt,” while the contraction of the early 1990s hit hardest at white-collar workers and the two coasts.
In other recent recessions, “there was a sense you could move somewhere else to get out of it,” said Swonk, the economist. “What’s unique about this recession is how regionally dispersed it is and how it crosses sectors.”
Moreover, she said, the shock of job losses is greater now because companies are moving swiftly to dismiss employees rather than taking months to act after a layoff announcement. And severance packages are less generous than in decades past.
The unexpected breadth and depth of the job losses are reflected in the experience of Kelley Moore, 43, who took an administrative job at Tellabs Inc., a communications equipment firm in Naperville, Ill.
“I knew they were going through downsizing,” she said Friday. “I asked everyone I interviewed with” whether her position might be a target for elimination. “They said, ‘No. No. They can’t live without it.’ Well guess what? They’re living without it.”
Moore has been looking for work since January, with discouraging results.
“I’ve never experienced sending out so many resumes and not hearing anything back,” she said.
Nathan Olivarez-Giles in Los Angeles and Rebecca Cole in Washington contributed to this report.