Slowing Stream of New Jobs Helps to Explain Slump
By DAVID LEONHARDT
lack of hiring, rather than a wave of layoffs, appears to be the main problem afflicting the American economy.
Even as unemployment continued to mount last year, the number of jobs being eliminated fell below the level in the late 1990's, according to a new government report. But the number of jobs that businesses created in 2002 dropped to its lowest level since 1995. Compared with the size of the economy, the rate of hiring was even slower than during the weak recovery of the early 1990's.
The results come from a survey that the Bureau of Labor Statistics published for the first time yesterday, offering a fuller picture of the nation's long jobs slump. The government previously reported only the net change in employment, which does not explain whether a weak job market like the current one stems mainly from layoffs or from companies' unwillingness to hire.
The new numbers portray an economy stuck in neutral, with workers no longer losing their jobs at the rapid pace of 2001 but with relatively few new job opportunities popping up. In the last three months of 2002, 7.8 million jobs were eliminated, while 7.7 million were created, according to company records studied by the bureau.
"You get a picture of a job market where employers, nervous about undertaking new labor costs in the face of weak demand, are very reticent about hiring," said Jared Bernstein, a senior economist at the Economic Policy Institute, a liberal research group in Washington.
The absence of new jobs means that conditions have not improved for people entering the work force, like graduating college students. But the drop in layoffs since 2001 has clearly helped many workers, sparing them the financial and emotional pain of job loss.
This could be one reason that polls show Americans remaining more upbeat about the economy than they were in the wake of recessions during the 1980's and 1990's, analysts said. The difference in attitudes could benefit President Bush in his re-election campaign and damp the effect of criticism by Democrats challenging his economic stewardship.
"Most people feel pretty confident in their job," said Karlyn H. Bowman, a public opinion expert at the American Enterprise Institute, a conservative research group. "It's what they see in the larger economy that concerns them."
"It's a complicated situation for the administration," she added.
On the campaign trail and Capitol Hill, the Democrats have continually criticized the administration for the net loss of 2.7 million jobs since the start of 2001. The detailed new data lays out a more nuanced picture of the hiring and firing that produced that net job loss, the worst in 20 years.
Economists warn that the combination of meager job creation and mild job elimination is usually a symptom of a sickly economy. During the economic boom of the 90's, a cycle often described as "creative destruction" seemed to take hold, with the number of jobs eliminated by layoffs or plant closings continuing to rise, but not nearly as fast as new jobs were being added.
By the end of 2002, the pace of layoffs was near its low point for the last 10 years, relative to the economy's size. The data released yesterday covers a period from 1992 to 2002.
"Lots of jobs get destroyed when the economy is doing well because people will do risky things and take chances," said Lawrence Katz, an economics professor at Harvard. "And some will fail."
In the 1990's, employment in many parts of the country where large numbers of jobs were eliminated — like the Washington suburbs, Detroit and Cincinnati — actually rose more quickly than in cities that experienced less job destruction, like Baltimore and Allentown, Pa., according to R. Jason Faberman, an economist at the Bureau of Labor Statistics.
Today, the stagnation of those cities struggling to add jobs has spread across much of the country, and many people looking for work have found only disappointment.
The average length of unemployment has jumped to about 19 weeks from roughly 13 weeks during the late 1990's, according to the Labor Department. The number of applications to law school and medical school has soared as college graduates have struggled to find work. The rare businesses that are adding to their payrolls have been inundated with applications.
When Charles River Apparel, a small company based in Medford, Mass., that makes pullover jackets and other outerwear, recently advertised an opening for a sales manager, it received about 1,000 résumés, said Barry S. Lipsett, the company's president. While only a few years ago Charles River struggled to fill its ranks, from executive to warehouse worker, now the company receives phone calls and résumés from job seekers even when it has not listed an opening.
"People are calling us unsolicited," said Mr. Lipsett, who oversees a work force of about 65, up from 55 a year ago. "That's the most amazing thing."
Economists attribute the hiring slump to both the aftermath of the 1990's bubble in stocks and technology spending and the whipsaw nature of economic growth during the last two years. The bubble left many companies with more workers than they needed, while the economy's uncertain path since 2001 has made many executives reluctant to make the costly decision to hire a new employee.
The popularity of cost-cutting in corporate America, relative to earlier decades, also seems to be playing a role, said Erica L. Groshen, an economist at the Federal Reserve Bank of New York.
"Employers now see a downturn as a mandate to lower costs," Ms. Groshen said. "They're making permanent changes," she said, instead of quickly hiring back workers once a recession is over.
The most recent recession ended in November 2001, but net job losses have continued since then, as growth has remained tepid and many companies have figured out ways to increase production without adding workers.
The new report almost certainly understates the amount of churning in the economy because it is based on the number of people employed at a job site at the end of each quarter. If a job changes hands during the quarter, or is eliminated and replaced by another job, it does not show up in the data, said Richard L. Clayton, a division chief at the Bureau of Labor Statistics.
In the next six months, the bureau plans to release the data broken down by geography and by industry, Mr. Clayton said.
On Friday, the bureau will publish the most current picture of the job market: the net change in employment during September and the jobless rate for the month. |
