Beneath the Smiles, a Churning Anxiety
November 2, 2003
ECONOMIC VIEW
By LOUIS UCHITELLE
The New York Times
WE live in a manic-depressive economy, and right now we're in the manic phase.
The annual growth rate, 7.2 percent in the third quarter,
was spectacular. The Keynesian-style stimulus has been wonderfully effective.
But the depressive phase may kick in again soon, as growth
slows and millions of employed and unemployed Americans struggle
to make up for lost incomes.
They are out there trying now, earning $40,000 or $50,000, for example,
rather than the $50,000 or $60,000 they made before they were laid off
and took pay cuts to get work again. The Labor Department does not
calculate their growing numbers, and neither does anyone else.
But who notices these days? Consumer spending carried the economy
in the summer and early fall, accounting for two-thirds of the third-quarter
growth rate. Tax cuts and mortgage refinancing put hundreds of millions
of dollars into people's pockets - offsetting lost income - and low interest
rates cut borrowing costs.
The 7.2 percent growth rate is not sustainable. Nearly every forecaster
concedes that. A month into the fourth quarter, the growth rate has
probably fallen back to 4 percent or so. That is still robust, but not
enough to dispel the sadness that will set in as we climb down from euphoria.
Part of the sadness lies in the obstacles to re-employment.
The corporate sector remains plagued with overcapacity and may require many months
of 4 percent growth just to make full use of those currently working.
Job creation has to move above 200,000 a month, most economists say, before
we can begin to shrink the pool of nearly nine million unemployed.
We haven't gotten to six-digit job creation yet, much less sustained it. No
wonder the unemployed spend 19.7 months, on average, seeking work,
the longest stretch in nearly 20 years.
"The breadth of the unemployment is almost unprecedented,'' said
Mark Zandi, chief economist at Economy.com.
Of the nine million unemployed, five million were laid off or fired,
according to the Bureau of Labor Statistics. (The remainder are new entrants or
people returning to the labor force after a voluntary absence.)
Most of those five million will work again, but for less pay. The bureau's wage data,
from its "job displacement'' surveys done every two years, are clear on this point.
Three people are laid off, and three years later only one has
regained the lost wage or risen above it.
Labor economists describe the process: You are forced out of
a $25-an-hour job and, after six months of job hunting, find work at $20 an hour.
Two years later, having struggled back to $23 an hour, you are laid off again,
and you slip back into the next job at $21 an hour. During this period, your
standard of living suffers not only from the lower wage, but also
from the income lost during unemployment and the loss of the raises you would
have received if you had never been laid off.
How many millions of people are living this experience? Such a number,
if it existed, would be an effective indicator of our standard of living and
our ability to sustain economic growth through consumer spending.
Among the currently unemployed, most are expected to face lower pay in their
next jobs. But how many Americans now working lost one or more
jobs in the last 20 years as layoffs spread?
The Bureau of Labor Statistics suggests the number is high. It has been
tracking 10,000 people, a cross section of the population, since 1979, when
most were teenagers and the permanent layoff was just becoming a
national phenomenon. They are in their 30's and 40's now, and over the years
each has held, on average, 9.6 jobs. The survey does not include
reasons for so much job-changing, but the average is high enough to suggest that
at least one or two of the jobs followed layoffs.
IN a similar vein, Ann Huff Stevens, a labor economist at the University
of California at Davis, working with data from a 1992 health and
retirement study, found that among men and women 51 to 62 years
old who had been laid off, 47 percent had been laid off more than once.
Such surveys suggest that tens of millions of Americans are struggling
to get their incomes back to where they were. The struggle dampened wage
gains even in the booming 90's and has sapped confidence. "They have lost
their seniority and their confidence that they can ride out succeeding
waves of layoffs,'' said Katherine Newman, a sociologist at the Kennedy
School of Government at Harvard. "And they see now that education does
not protect them anymore. It used to, but it doesn't anymore. It shakes
their faith in their capacity to control their lives.''
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