When the
unemployment rate rose in most states last month, it underscored the extent to
which the deep recession, the anemic recovery and the lingering crisis of
joblessness are beginning to reshape the nation’s economic map.
The once-booming South, which entered the recession with the lowest unemployment
rate in the nation, is now struggling with some of the highest rates, recent
data from the Bureau of Labor Statistics show.
Several Southern states — including South Carolina, whose 11.1 percent
unemployment rate is the fourth highest in the nation — have higher unemployment
rates than they did a year ago. Unemployment in the South is now higher than it
is in the Northeast and the Midwest, which include Rust Belt states that were
struggling even before the recession.
For decades, the nation’s economic landscape consisted of a prospering Sun Belt
and a struggling Rust Belt. Since the recession hit, though, that is no longer
the case. Unemployment remains high across much of the country — the national
rate is 9.1 percent — but the regions have recovered at different speeds.
Now, with the concentration of the highest unemployment rates in the South and
the West, some economists and researchers wonder if it is an anomaly of the
uneven recovery or a harbinger of things to come.
“Because the recovery is so painfully slow, people may begin to think of the
trends established during the recovery as normal,” said Howard Wial, a fellow at
the Brookings Institution’s Metropolitan Policy Program who recently co-wrote an
economic analysis of the nation’s 100 largest metropolitan areas. “Will people
think of Florida, California, Nevada and Arizona as more or less permanently
depressed? Think of the Great Lakes as being a renaissance region? I don’t know.
It’s possible.”
The West has the highest unemployment in the nation. The collapse of the housing
bubble left Nevada with the highest jobless rate, 13.4 percent, followed by
California with 12.1 percent. Michigan has the third-highest rate, 11.2 percent,
as a result of the longstanding woes of the American auto industry.
Now, though, of the states with the 10 highest unemployment rates, six are in
the South. The region, which relied heavily on manufacturing and construction,
was hit hard by the downturn.
Economists offer a variety of explanations for the South’s performance. “For a
long time we tended to outpace the national average with regard to economic
performance, and a lot of that was driven by, for lack of a better word,
development and in-migration,” said Michael Chriszt, an assistant vice president
of the Federal Reserve Bank of Atlanta’s research department. “That came to an
abrupt halt, and it has not picked up.”
The long cycle of “lose jobs, gain jobs, lose jobs” that kept Georgia’s
unemployment rate at 10.2 percent in August — the same as it was a year earlier
— is illustrated by Union City, a small city on the outskirts of Atlanta.
It suffered a blow when the last store in its darkened mall, Sears, announced
that it would soon close. But the city had other irons in the fire: a few big
companies were hiring, and earlier this year Dendreon, a biotech company that
makes a cancer drug, opened a plant there, lured in part by state and local
subsidies.
Then, Dendreon announced this month that it would lay off more than 100 workers
at the new plant as part of a national “restructuring.”
Union City, with a population of 20,000, now calls itself the place “Where
Business Meets the World” and has been trying to lure companies by pointing out
its low business taxes, various incentive programs and proximity to
Hartsfield-Jackson Atlanta International Airport.
Steve Rapson, the city manager, said that the challenge there, as in much of
America, has been to get employers to hire again. “It’s hard to get your mind
around what can you do as a city to encourage future jobs and jobs growth,” he
said.
The reordering of the nation’s economic fortunes can be seen in the Brookings
analysis, which found that many auto-producing metropolitan areas in the Great
Lakes states are seeing modest gains in manufacturing that are helping them
recover from their deep slump, while Sun Belt and Western states with sharp
drops in home values are still suffering. The areas that have been hurt the
least since the recession, the study said, rely on government, education or
energy production. Places that were less buoyed by the housing bubble were less
harmed when it burst.
In Pennsylvania, the analysis found, the Pittsburgh area — which is heavily
reliant on education and health care — is weathering the downturn better than
the Philadelphia area. In New York, areas around long-struggling upstate cities
like Buffalo and Rochester are recovering faster by some measures than the New
York City metropolitan area. And the rate of recovery in Rust Belt areas around
Youngstown and Akron, two Ohio cities that were hit hard, has outpaced that of
former boomtowns like Colorado Springs and Tucson.
In a sign of how severe the downturn has been, the Brookings analysis found that
only 16 of the nation’s 100 largest metropolitan areas have regained more than
half of the jobs they lost during the recession.
The toll on the nation’s millions of unemployed people has been harsh, with the
Census Bureau reporting that the United States had more people living in poverty
last year than in any year since it began keeping records half a century ago.
Joblessness is taking a toll on states, too. This month, 27 states will have to
pay $1.2 billion to the federal government in interest on the $37.5 billion that
they borrowed in recent years to keep paying unemployment benefits.
What is most striking about the high unemployment rates, several economists said
in interviews, is how they continue to afflict wide parts of the country.
“It just seems to be so pervasive across the country — except for the
breadbasket area — that it’s hard to pick out anybody who is bouncing back,”
said Randall W. Eberts, the president of the W. E. Upjohn Institute for
Employment Research in Michigan.
Dr. Eberts pointed to another feature of the downturn: people are much less
likely to leave their jobs voluntarily.
Before the recession, he said, about three million people voluntarily left their
jobs each month. Now, around two million people do — leaving fewer openings for
job seekers.
So what happened in South Carolina? Richard Kaglic, a regional economist with
the Federal Reserve Bank of Richmond, Va., said the state’s lingering troubles
reflect what happened when its once-thriving construction and manufacturing
industries were hit hard by the recession. Mr. Kaglic, who is also a pilot, used
an aviation metaphor to explain what he meant.
“If your nose is high, if you’re climbing faster and your engine cuts out, you
fall farther and it takes you a longer time to recover,” he said. “The
conditions we experienced in late 2008, 2009, are as close as you come to an
engine-out situation in the economy.”
But Mr. Kaglic said that the recent return of manufacturing jobs was giving him
hope, and that one reason for the high unemployment rate was that more people
were now seeking work.
“I would look at it as our dreams are delayed,” he said, “rather than our dreams
being denied.”
It is well known that during the nation’s gale-force recession, many older
Americans who dreamed of retirement continued to work, often because their
401(k)’s had plunged in value.
In fact, there are more Americans 65 and older in the job market today than at
any time in history, 6.6 million, compared with 4.1 million in 2001.
Less well known, though, is that nearly half a million workers 65 and older want
to work but cannot find a job — more than five times the level early this decade
and this group’s highest unemployment level since the Great Depression.
The situation is made more dire because of numerous recent trends: many people
over 65 have lost their jobs as seniority protections have weakened, and like
most other Americans, a higher percentage of them took on debt than in previous
generations.
The expectation once was to pay off your 30-year mortgage before you retired, or
come close. Instead, the level of indebtedness among older Americans has risen
faster than in any other age group, partly because so many obtained second
mortgages to take money out of their homes.
This financial squeeze is one reason President Obama has proposed giving a
special $250 one-time payment to all Social Security recipients.
Many out-of-work older Americans complain that they face foreclosure or have had
to give up their car.
“It’s a big deal for a lot of these people not to find a job,” said David
Certner, legislative policy director for AARP. “That so many of them are still
trying to find work shows how bad the economic situation is. A lot of people
normally give up at that age.”
The unemployment rate for older Americans is still much better than for others —
6.7 percent compared with 9.8 percent in the general population. But 6.7 percent
is more than double the level of two years ago — and far higher than the
minuscule 1.9 percent rate early this decade.
And unemployed older workers stay out of work longer — 36.5 weeks on average, 40
percent longer than for the unemployed in general.
Patricia Warmhold, who has worked as a translator and telemarketer, would love
to retire, but at age 67, she says that is out of the question.
Her mortgage payment is nearly $1,500 a month, and her car payments and auto
insurance are another $350. She receives $1,071 a month in Social Security and
$918 in pension.
“I have very little after the mortgage,” she said.
Ms. Warmhold, who speaks German, French and Creole, was laid off a year ago from
her job as an interpreter for a law firm. “I’ve been looking for jobs ever
since,” she said. “I applied to Nassau County and Suffolk County, and they don’t
call back.”
A divorce worsened her financial situation, although her mother, who is in her
90s, helps by sometimes sending her $100.
“In a month’s time, I sent out 101 job applications,” she said, including more
than 50 to school districts, to no avail.
The recession has battered young, middle-aged and old, although several modern
trends have left older workers more vulnerable than in the past — for instance,
the shift toward 401(k)’s and away from traditional pensions that give retirees
a monthly stipend for life has pressured many Americans to continue working well
past 60.
Another force pushing Americans to delay retirement is that the percentage of
companies that provide health coverage to retirees is half what it was two
decades ago. Moreover, the age to obtain full Social Security benefits has
increased to at least 66 for people born after 1942, from its traditional 65.
The median income for those 65 and over was just $18,208 in 2008 — a quarter of
them had incomes under $11,139, according to Patrick Purcell, an expert on older
workers and pensions with the Congressional Research Service.
The average Social Security recipient age 65 and over receives just $12,437 in
annual benefits, he said, and among individuals 65 and older who received income
from financial assets, half received less than $1,542 last year.
While Social Security keeps most seniors above the poverty line, there are a
substantial number near poverty “who are just getting by,” said Richard W.
Johnson, a senior fellow at the Urban Institute. Many economists say it is good
that Americans are working later in life — many are living longer and able to
contribute longer.
Still, many older job seekers insist they are losing out because of age
discrimination. Last year, nearly 25,000 workers filed age discrimination
complaints, a 29 percent jump over 2007, according to the Equal Employment
Opportunity Commission.
“I often get told that I’m overqualified,” said Barbara Brooks, 71, who retired
in 2003 after 30 years as an administrative assistant at the University of
California, Los Angeles. She said being told that is code language for “you’re
too old.” But Ms. Brooks said she wanted to work — and needed to — citing her
monthly mortgage of $1,500, which eats up half her monthly pension.
“I would like to be able to treat myself to a couple of dinners, maybe a movie,”
Ms. Brooks said. “I think as long as people have excellent skills, and they can
get around like a 40-year-old — I’ve been told I look 40 or 50 — why shouldn’t I
work?”
For years, unemployment among older Americans was largely ignored because so few
of them were jobless. But now more than a million Americans over age 60 are
unemployed, two-and-a-half times the level two years ago.
And at least jobless workers 65 and over are guaranteed health coverage through
Medicare. Workers laid off before that age often have to fend for themselves to
obtain health insurance, which is often prohibitively expensive for those over
60.
One such worker is Michael Husar, 62, a former engineering manager who spent 38
years with General Motors and then its Delphi auto parts spinoff. Mr. Husar, a
resident of Scottsdale, Ariz., retired in 2003 at age 56, but as a result of
Delphi’s bankruptcy, he now has to purchase his own health insurance. He pays
$1,600 a month, which translates to $19,200 a year.
Despite two engineering degrees, his search for consulting work has come up
empty in recent months.
“There are two reasons I feel a need to continue working,” he said. “One, I
still have a lot to offer, and two, I need the money.”
Alicia H. Munnell, director of the Center for Retirement Research at Boston
College, says older workers have fared better by and large than younger workers
in this recession. The percentage of workers ages 25 to 54 with jobs has fallen
to 75 percent, from nearly 80 percent two years ago, while the percentage of
older Americans with jobs has risen slightly, to 16.3 percent.
But that is fewer than the number who want to work.
Patricia Piazza, 66, who worked for Chrysler for 30 years as an analyst, knows
that all too well.
She and her 72-year-old husband, a longtime employee at General Motors
Acceptance Corporation, had planned to retire by now, but she is hunting for
job, and he recently landed one with the local transit system.
Their home in Warren, Mich., has dropped $100,000 in value, Ms. Piazza said,
while their pensions, as former nonunion employees, will be far less than
anticipated because of the auto company bankruptcies.
Chrysler recently took away her life insurance policy and optical coverage, she
said.
“It’s like the bottom fell out of everything” she said. “This isn’t the way we
planned retirement.”
The American economy lost 467,000 more jobs in June, and the
unemployment rate edged up to 9.5 percent in a sobering indication that the
longest recession since the 1930s had yet to release its hold.
“The numbers are indicative of a continued, very severe recession,” said Stuart
G. Hoffman, chief economist at PNC Financial Services in Pittsburgh. “There’s
nothing in here to show that the economy and the market are pulling out of the
grip of recession.”
The Labor Department’s monthly snapshot of employment, released Thursday,
challenged visions of a recovery already taking root. The numbers intensify
pressure on the Obama administration to show returns on programs aimed at
improving national fortunes — not least its $787 billion stimulus plan.
Some economists are now calling for another dose of government spending to
stimulate the economy, though the White House maintains that enough money is in
the pipeline already.
“Not all the recovery money has been put to work yet,” said the labor secretary,
Hilda L. Solis. “We’re making progress.”
But Ms. Solis acknowledged that joblessness was already much worse than the
administration projected in January when it created its stimulus spending bill,
suggesting then that joblessness would peak at about 8 percent.
Asked why the unemployment rate is already much higher, Ms. Solis noted that
much of the stimulus money was moving slowly, with construction projects in
particular requiring time-consuming government permits.
“Over all, it’s been a challenge,” Ms. Solis said. “We still have a ways to go.”
That explanation echoed criticism that some initially leveled at the spending
package when it was debated in Congress: many of the projects would take too
long to get going, creating too few jobs in the near term. Still, Ms. Solis
portrayed the program as a success.
“We would have done much worse had we not put the recovery plan in place,” she
said.
In recent weeks, positive signs have emerged that automakers are beginning to
see stronger sales, factories are gaining more orders, and housing prices have
stopped falling in some markets. But the jobs report injected the sense that
paychecks are disappearing so swiftly that consumer spending is likely to be
tight, limiting economic activity. The gloomy news caused the Standard & Poor’s
500-stock index to tumble more than 2 percent.
Indeed, the report reinforced a consensus that high levels of unemployment are
likely to afflict American life for many months and perhaps much longer. That
will dump more jobless people into a weak job market, making it harder for those
already unemployed to find work and pressing down wages and hours.
After a May report that showed the pace of deterioration was moderating, some
economists expressed hopes that an economic recovery might finally be emerging.
But the June report tempered such thoughts.
For another month, manufacturing jobs disappeared, dipping by 136,000, while
construction jobs shrank by 79,000 and retail by 21,000. Health care remained a
rare bright spot, adding 21,000.
The losses for June lifted net jobs shed since the beginning of the recession to
6.5 million — equal to the net job gain over the previous nine years.
“This is the only recession since the Great Depression to wipe out all jobs
growth from the previous business cycle,” Heidi Shierholz, an economist at the
labor-oriented Economic Policy Institute in Washington, said in a research note.
She called this fact “a devastating benchmark for the workers of this country
and a testament to both the enormity of the current crisis and to the extreme
weakness of jobs growth from 2000 to 2007.”
The June figures did show continued slowing in the pace of job losses. From
November to March — after the collapse of some prominent financial institutions
— the labor market lost an average of 670,000 jobs each month. From April to
June, the decline slowed to 436,000 a month.
The Obama administration seized on those numbers to argue that its stimulus
spending plan was gradually working.
“We’re seeing a kind of leveling off here,” said Ms. Solis, the labor secretary.
Some economists contend that a recovery is indeed in its early stages,
cautioning that the job market tends to lag behind progress in other areas.
Michael T. Darda, chief economist at the research and trading firm MKM Partners,
pointed to a recent rally in the corporate bond market as a sign that normalcy
was returning to the financial system. He asserted that this presaged the
resumption of economic growth in the second half of this year and vigorous
activity next year.
“The labor market is going to lag the recovery process to a certain degree,” he
said.
But other experts argued that employment was a more crucial source of spending
power than in downturns past, given how many alternate sources of cash had been
lost.
Consumer spending amounts to 70 percent of overall American economic activity.
In recent times, Americans found myriad ways to fuel spending even as incomes
for many households stagnated, borrowing against the once-rising value of homes
and tapping credit cards.
Now, the paycheck has returned as the primary source of spending. Yet pay is
eroding even for those who have jobs.
The average workweek for rank-and-file employees in the private sector — roughly
80 percent of the work force — slipped by a fraction to 33 hours, the lowest
level since the government began tracking such data in 1964.
The so-called underemployment rate — which captures not only the jobless but
also those working part time because their hours have been cut or they cannot
find a full-time job — increased to 16.5 percent.
Some economists contend that while unemployment remains high, millions of
Americans will continue to watch their spending.
“It looks really bad,” said Dean Baker, co-director of the Center for Economic
and Policy Research in Washington. “There are no green shoots here. People can’t
spend when they don’t have the money.”
For another month, the average length of official unemployment increased, this
time to 24.5 weeks — the highest level since the government began tracking such
data in 1948. The unemployment rate, 9.5 percent, is the highest since 1983.
Layoffs have slowed in recent months, but hiring has yet to pick up, meaning
that jobless people face a more frustrating search.
In the Brownsville section of Brooklyn, Jeffrey Jones, 40, has found no work
since losing his job as a cook at a senior center in October. He worries about
paying rent and caring for his four children.
“I know I’m not supposed to be letting it stress me out,” he said. “The way I’m
going now, I won’t be able to make it too much longer. I can’t go this long
without doing something for my family.”
January 25, 2009
The New Yoirk Times
By LOUIS UCHITELLE
After years of struggling to get their wages up, the nation’s
workers are trying to find jobs that will simply last, at least through the deep
recession.
Fearing layoffs, investment bankers at a Merrill Lynch or a Morgan Stanley are
joining small Wall Street firms for less pay but with signed employment
guarantees. Academics are migrating to community colleges, which are adding
teachers as enrollment rises. And in Eastern Wisconsin, workers furloughed from
a paper mill they fear will not reopen are training as truck drivers and
welders.
“Looking online and in newspapers and talking to my instructors, I’ve decided
that trucking and welding stand out as jobs that are available and will continue
to be available, and a lot of my friends agree,” said Dan Geneen, who has picked
up a truck-driving certificate and is learning welding since he was let go by
the paper mill last fall.
Trucker and welder are hardly glamorous careers to most Americans. But there is
a new allure developing around jobs likely to keep a person employed, at
reasonable pay, through a prolonged downturn. Government employment once offered
that promise, certainly in the Great Depression. But government hiring is less
than robust now, at 181,000 additions over the last year, mostly at the state
and local level. That is far from offsetting the 2.5 million jobs lost in the 13
months of recession.
With his economic recovery package now before Congress, President Obama promises
to generate thousands of steady jobs, some of them in government. Until those
positions appear in abundance, however, the hunt for safe work is occurring
mainly in the private sector — and the hunting is not easy.
“The companies doing the least hiring right now are very often the companies
that offer the safest jobs,” said Susan Houseman, a senior economist and labor
expert at the Upjohn Institute, a research group in Michigan.
With employers shedding half a million jobs a month, some economists, like Nancy
Folbre of the University of Massachusetts in Amherst, liken safe jobs to high
ground amid the turbulent flood waters of lost employment.
“There is a danger in using the term ‘safe jobs’ for this perch,” Ms. Folbre
said. “That makes them sound like sinecures, and they are not.”
Such is certainly the case on Wall Street. The flow to the smaller boutique
firms often involves top people at big but shaky investment banks. Fearful they
will be laid off, they move on before the ax falls, said Cheryl Solit, a partner
at Solit Tessler & Company, a placement firm in Short Hills, N.J., that helps
such executives make the switch to jobs with less initial compensation but more
security, although in these hard times, not that much more.
“The no-layoff clauses in the contracts they sign are usually for one or two
years,” she said, “and usually in the form of guaranteed compensation. The new
employer is not likely to lay you off when he has to pay you anyway.”
Community colleges are turning out to be a similar mecca as enrollment rises
because of the recession. Laid-off workers are flocking to the schools to
retrain for other occupations, and young people are enrolling in greater numbers
to avoid the higher tuitions of a four-year college, said James Jacobs,
president of Macomb Community College in Warren, Mich.
At 41,000 students, Macomb’s enrollment is up 10 percent from last year, Mr.
Jacobs said. With the recession driving enrollment, he is adding to his staff of
220 full-time teachers and 750 adjuncts. Most of the new hires are adjuncts,
though the courses they teach there and at another community college often add
up to full-time work.
Since enrollment is rising, they are assured of work semester after semester,
Mr. Jacobs said. The annual pay is $40,000 or less — usually less — and no
benefits. Still, they are coming back.
“If you spent six or seven years and hundreds of thousands of dollars getting a
graduate degree and you end up doing this, that is not a happy thought,” Mr.
Jacobs said. “But it is steady work.”
That is precisely what Mr. Geneen, the displaced paper mill worker, seeks from
his course work at Fox Valley Technical College in Appleton, Wis., where he
earned a truck driver’s certificate in December and is now learning to be a
welder.
He was laid off in September as an operator of a coating machine when the
NewPage paper company in Kimberly, Wis., shut — a victim of plunging demand. Mr.
Geneen, 47, had worked at the mill since high school. He says he is not even
trying to match the $60,000, with overtime, he earned at NewPage.
Steady work, even in a recession, is his current goal, which makes him reluctant
to exercise his recall rights even if NewPage reopens. “I don’t want to have the
same thing happen to me again five years from now, when I’m older,” he said.
Taking advantage of a federal subsidy to train for what he considers a safer
occupation, he completed a 10-week course to become a commercial truck driver.
Even though truck shipments are off sharply and drivers’ employment has fallen,
Mr. Geneen sees a need for truck drivers, in good times and bad. So do 34 others
who were laid off at NewPage and took the same course.
“Two of my classmates just this week applied at a trucking company advertising
for tractor-trailer drivers,” Mr. Geneen said. “They were hired on the spot and
told to report for work on Feb. 1. They didn’t even meet with the personnel
people.”
Mr. Geneen says he plans to drive a truck, preferably within Wisconsin. But with
his wife, Kathy, earning $40,000 a year as a certified public accountant and
with enough severance from his mill job to help carry the family for a while,
Mr. Geneen has enrolled in a yearlong course to qualify as a welder. It is
another occupation chronically short of qualified people, even in a recession.
At $40,000 a year or so, welders’ work would not match his old pay but would
provide a backup plan for the future.
“I want options that will hold up in a failing economy,” he said.
As the recession deepens, the only industry in the private sector adding jobs in
significant numbers is health care, according to data from the Bureau of Labor
Statistics, and it is doing so across the board, from physician to bed pan
attendant.
Government used to be a refuge, particularly postal work and public school
teaching. But the post office has been shrinking its payroll for several years.
Public school employment — mainly kindergarten through high school — rose
through August to nearly 8.1 million jobs, but it has fallen each month since as
declining tax revenue forces cutbacks.
Those cutbacks rarely apply to math and science teachers, who are often in short
supply. “Teaching math in a high school in an affluent suburb,” said Tom
Geoghegan, a labor lawyer in Chicago and a Democratic candidate for Congress,
“that is my idea of the ultimate safe job.”
January 20, 2009
The New York Times
By PETER S. GOODMAN
COLUMBIA, S.C. — Joe Lewis came to the local employment office on Friday in
the hope of buying a little more time.
Four months had passed since he lost his job as a maintenance worker at a chain
of convenience stores, trading a paycheck of $370 a week for an unemployment
check of $180 a week. With those benefits about to expire, Mr. Lewis arrived to
fill out the paperwork for an extension, weary and uncertain about the future.
A new president is about to take responsibility for the American economy — the
first black president, which has a particular resonance for Mr. Lewis, 52, an
African-American. That Barack Obama is promising to devote hundreds of billions
of dollars toward creating jobs is interesting, too. Yet none of this gave Mr.
Lewis comfort.
“I haven’t seen the change,” Mr. Lewis said. “Until he does something, he’s just
like all the rest of them to me. He ain’t done nothing for me. Everybody’s
making promises.”
Mr. Lewis’s job search has amounted to an in-depth tour of shrinking prospects
in one of the worst economic downturns since the Depression. He has applied at
warehouses, at a moving company, at a concrete plant. So far, nothing. The next
stop: a poultry slaughterhouse on the outskirts of Columbia.
Variations on his story echoed through the employment office in downtown
Columbia, whose economic experience traces the national trajectory of the last
decade more than any other metropolitan area. The people who passed through on
this recent morning provided a snapshot of the extraordinary economic challenges
inherited by the new president, as well as the mixture of hope and skepticism
that greets his arrival.
Hope, because Mr. Obama represents a distinct break from the past, armed with a
mandate to unleash government largess toward putting millions of people back to
work. Skepticism, because Washington seems a long way from where most Americans
live, geographically and figuratively. At the employment office, sounds of
frustration created the running soundtrack. “This is the issue ...” “I never got
the call.” “The store has closed ...” “I just need this paper signed, showing
that I been here.”
A lot of people have been here. In December, 23,029 people passed through here
to arrange job training, seek a new job or arrange unemployment benefits, said
Keith Lucas, area director of the Midlands Workforce center, the official name
for the place. That was far more than the 13,698 who came in the final month of
2007.
Nationally, some 2.6 million jobs have disappeared since December 2007, when the
recession began. Last week, 524,000 more Americans filed for unemployment
benefits, amid forecasts that the number could spike as high as 750,000 by late
this year.
The economy that Mr. Obama is supposed to somehow fix is gripped by fear and the
deepening realization that, for many people, recovery will be an exercise in
making do with less than they had before.
A year ago, people let go by area factories that had paid as much as $18 and $20
an hour generally balked at the idea of retraining for a job installing heating
and air-conditioning gear at half that pay. Now, those training programs are
packed.
“There was a lot of resistance before,” said Abby Linden, who oversees such
programs. “People now seem to expect that they’re going to have to start over.”
Mr. Obama’s inauguration is like a palpable marker of a new beginning for many,
an inarguable sign of change, she said. “There’s a lot of excitement and hope,”
Ms. Linden said. “People have a lot of faith in him, and faith that he’s going
to be able to turn it around.”
And yet, out in the lobby, where dozens of people sat quietly in plastic-backed
chairs arrayed across the linoleum floor, waiting to apply for unemployment
benefits, weariness and resignation carried as much weight as faith and hope.
“It’s got to be better, it can’t be worse,” said Charles English, 62, who lost
his job at an asphalt plant two years ago and has not worked since, living on
the good graces of his grown son. “Just to listen to Obama talk and see those
kids of his, it just makes you stand up and feel proud.”
But the talk of big spending on public works projects to generate jobs seemed to
exclude him. “I ain’t able to go out and get this construction work,” he said.
“I’m too old for that. So what happens to me?”
As John Arnette sat beneath the pale glow of the fluorescent lights, waiting to
inquire why his check had suddenly stopped, he worried that Mr. Obama was
promising to spend money the country did not really have, adding to long-term
debts.
“You’ve got all the money that’s been given to the financial sector, plus all
the money that’s going to the Big Three auto companies,” he said. “Where’s the
money going to come from?”
It was the same question being asked with increasing frequency in his own
household: Despite his college degree, Mr. Arnette, 36, has been out of work
since May, when he lost his job as a midlevel manager at a convenience store
chain.
Looking for work has been a humiliating process of discovery. Fresh college
graduates are working as waiters or stocking the shelves at Lowe’s, the home
improvement store. Management positions there seem increasingly filled by people
with graduate degrees.
His wife still works, at a Verizon Wireless call center, but their household
income has dropped from $150,000 a year to about $65,000.
“I’m blessed that my wife has a good job,” Mr. Arnette said. “Without that, I’d
be homeless.”
October 20, 2008
The New York Times
By KIRK SEMPLE
HEMPSTEAD, N.Y. — More than 50 day laborers stood, bored, anxious and mostly
silent, in the sun-blasted parking lot of a Home Depot here last week, tracking
the ebb and flow of customers and hoping for work. The hours crawled by. Six,
maybe seven men scored jobs. The rest just waited.
“To stand here doesn’t make a lot of sense to a lot of people,” Jairo Mancillas,
29, a day laborer from El Salvador, said glumly as he waited on a grassy median
in the parking lot. “But to us, it’s a very important thing. It means a lot.”
This bleak scene is playing out at scores of day laborer sites across the
region. Here on Long Island; under the elevated No. 7 line on Roosevelt Avenue
in Jackson Heights, Queens; at the intersection of Port Richmond Avenue and
Castleton Avenue on Staten Island; along Bay Parkway in Brooklyn; near highway
on-ramps in Westchester County; and into New Jersey and Connecticut, clusters of
day laborers, their numbers swelled by people laid off from full-time jobs, wait
for work that, more often than not, never comes.
Two years ago, when the economy was booming and home-building was thriving, many
of these same laborers were working every day. Now, they are lucky if they work
twice a week, many of them say. Their lives have become a test of wits, patience
and hope.
Simple lives have become simpler. The laborers, most of them illegal immigrants,
said they had stopped eating in restaurants, buying new clothes and sending
money home to their families. In interviews with more than a dozen laborers in
New York City and its suburbs, many said they were thinking about returning to
their homelands.
Carmelo Peña Garcia, 59, an illegal immigrant from Mexico who waits for work
every day at Roosevelt Avenue and 69th Street in Queens, said he was trying to
make just enough money to buy a plane ticket home. “Sometimes you don’t sleep
because you are thinking about work and nothing else,” he said on a recent
morning.
Here in Hempstead, Mr. Mancillas said, “The American dream isn’t an American
dream.”
The amount of money sent by immigrants in the United States to Latin America and
the Caribbean is expected to increase this year over last year, according to the
Inter-American Development Bank, which has been tracking remittances since 2000.
But when adjusted for inflation, the value of the remittances is actually
expected to decline. The bank attributed the drop to several factors, including
the economic downturn in the United States, inflation and a weaker dollar.
Like other day laborers, Mr. Mancillas came to the United States with the
intention of making money to help his family. In his village of Ahuachapán, El
Salvador, he was a tailor and worked from home, making trousers for adults and
children. But he was barely scraping by and decided to try his luck in the
United States.
He left his wife and two young daughters behind, and with the help of a
smuggler, whom he paid $2,500, traveled through Guatemala and Mexico, sneaked
across the border into California, then made his way to Hempstead in 2005.
Work came quickly at first, he said. Every morning just after dawn he and many
other day laborers would gather outside a Home Depot, and most days, he was
hired. In flush times, he made as much as $800 a week. He would send $600 home
and use the balance for food, clothes and his half of the $500 monthly rent for
a tiny room he shared with another laborer in a rooming house in Hempstead.
He and his friends made enough to be able to eat meals in restaurants and buy
clothes — for themselves and their families — at the mall. Mr. Mancillas would
fill boxes with toys and other goods and ship them to his daughters in El
Salvador.
But work slowed last year and now has nearly dried up: In the past several
months, like many other laborers, he has been working once or twice a week,
making between $80 and $200.
The drop in wages for Mr. Mancillas has resulted in sacrifices, large and small.
Mr. Mancillas said he now shops for clothes at the Salvation Army. He no longer
eats out and instead subsists on basic home-cooked food or rice and beans from
Latino delicatessens. He has also stopped buying clothes and toys for his
family.
Most significantly, he said, the remittances home are much smaller and less
frequent. Some weeks he does not send any money at all.
As the economy has worsened, the number of laborers gathering at the Home Depot
here has grown, making the competition for fewer jobs that much fiercer. The
newcomers have arrived from other cities, thinking things would be better in New
York. Or they have been laid off from longer-term jobs in manufacturing and
construction, either as a result of the economy or because of tougher crackdowns
on illegal immigrants.
As demand for day labor has plunged, some employers have taken advantage of the
glut of workers by paying them less or not paying them at all, several workers
said.
One of Mr. Mancillas’s friends, David, an illegal immigrant from Mexico, said a
contractor did not pay him for several days of work soon after he arrived last
year in Hempstead. But he did not seek help from the authorities because he was
afraid of being deported.
“He owed me $1,000,” said David, who refused to give his last name. “But fear
kept my mouth shut.”
The crowd thinned throughout the day as workers gave up and went home, most to
shared rooms in houses full of other laborers with little to do but watch
television. By midafternoon, fewer than 20 remained. Some sat alone on the curbs
of the medians, seemingly lost in their thoughts, but still keeping an eye out
for potential employers.
“When you return to the house and you haven’t worked and you can’t provide for
your family, you feel really bad,” Mr. Mancillas said.
Another of Mr. Mancillas’s friends, a 23-year-old Salvadoran named Junior
Garcia, spotted a Home Depot customer trying to wrestle some lumber into the
back of a van and sprinted over to help him. (Mr. Garcia would get a $10 tip out
of it, a small windfall.)
A few minutes passed. The men watched cars drive by.
Wilfredo Hernandez, 38, who was also from El Salvador, broke the silence. “I
used to go to restaurants all the time, drink beers,” he said. “One night I went
to the restaurant Hooters. You know Hooters?” He itemized his meal from that
night: a hamburger ($10) and four beers ($20). “I gave the waitress $36,” he
said wistfully.
The men said they did not know much about the turmoil in the financial markets.
“The investment in the war in Iraq is the reason, right?” Mr. Mancillas asked.
But while the details might have been obscure to them, the realities of the
country’s economic malaise were plainly, and painfully, evident.
“The situation in the United States has gotten bad,” Mr. Garcia said, fiddling
with a paint-splattered tape measure he carried on his belt. “I didn’t think it
was going to come to this.”
“Let’s see what sort of changes a new president brings,” Mr. Hernandez said. “If
it continues the same, I’ll go back.”
The men grew silent again and continued to scan the lot. The idea of returning
home was not a popular topic. And anyway, the day was not over yet, and there
was still a chance, however slight, of work.
May 27,
2008
The New York Times
By DAVID M. UHLMANN
Ann Arbor,
Mich.
ON a hot August morning in 1996, Scott Dominguez reported to work at Evergreen
Resources, a small fertilizer manufacturing plant in his hometown, Soda Springs,
Idaho. The workday began like any other, with gruff commands barked out by the
owner of the company, Allan Elias, who was a Wharton graduate, a lawyer and one
of the most notorious violators of environmental and worker-safety laws in the
state.
Mr. Elias wanted his workers to clean out a 25,000-gallon tank that contained
cyanide waste. He refused to test the air or the waste inside the tank. He
ignored the pleas of his workers for safety equipment. When the workers
complained of sore throats and difficulty breathing, Mr. Elias told them to
finish the job or find work somewhere else.
Mr. Dominguez, a 20-year-old high school graduate, wanted to keep his job.
Wearing just jeans and a T-shirt, he used a ladder to descend into the tank. Two
hours later, covered in sludge and barely breathing, he was removed from the
tank, a victim of cyanide poisoning at the hands of a ruthless employer who
would blame his “stupid and lazy” employees for the incident.
Mr. Dominguez suffered severe and permanent brain damage. He now has the rigid
body movement and stammering speech found in patients with Parkinson’s disease.
The Justice Department opened a criminal investigation of Evergreen Resources. I
was one of the lead prosecutors on the case. We quickly discovered that we had a
major problem.
Mr. Elias did not commit a crime under the Occupational Safety and Health Act,
which is the primary federal worker-safety law in the United States. Why not?
Because Mr. Dominguez did not die.
My colleagues and I were shocked to learn that an employer who breaks the
nation’s worker-safety laws can be charged with a crime only if a worker dies.
Even then, the crime is a lowly Class B misdemeanor, with a maximum sentence of
six months in prison. (About 6,000 workers are killed on the job each year, many
in cases where the deaths could have been prevented if their employers followed
the law.) Employers who maim their workers face, at worst, a maximum civil
penalty of $70,000 for each violation.
We ended up prosecuting Mr. Elias for environmental crimes, and he was sentenced
to 17 years in prison. I later became chief of the Justice Department’s
environmental crimes section, and we started an initiative — based on this case
and others like it — to seek justice when workers were seriously injured or
killed during environmental crimes. We prosecuted some of the largest companies
in America. But in cases where no environmental crimes were committed, we often
could not prosecute.
Employers rarely face criminal prosecution under the worker-safety laws. In the
38 years since Congress enacted the Occupational Safety and Health Act, only 68
criminal cases have been prosecuted, or less than two per year, with defendants
serving a total of just 42 months in jail. During that same time, approximately
341,000 people have died at work, according to data compiled from the National
Safety Council and the Bureau of Labor Statistics by the A.F.L.-C.I.O.
It is long past time for Congress to change the law. First, Congress should
amend the Occupational Safety and Health Act to make it a crime for an employer
to commit violations that cause serious injury to workers or that knowingly
place workers at risk of death or serious injury. Whether good fortune
intervenes and prevents harm to workers should not determine whether an employer
commits a crime.
Congress should make it a felony to commit a criminal violation of the
worker-safety laws, and the penalties for lawbreakers should be stiffened. The
maximum sentence ought to be measured in years, not months.
Congress also should change the worker-safety laws so that ignorance of the law
is no longer a defense. Employers have a duty to know their responsibilities
under the Occupational Safety and Health Act.
Finally, Congress should make clear who can be prosecuted. Some courts have held
that prosecution is limited to companies and their owners. Supervisors who order
workers to break the law, as well as responsible corporate officers who fail to
stop violations that they know are occurring, should also be held criminally
responsible, just as they are under most other federal laws.
Most companies care about protecting their workers. But without a serious threat
of criminal enforcement, more workers will be put at risk by companies that put
profits before safety.
April 4, 2008
The New York Times
By MICHAEL M. GRYNBAUM
The economy shed 80,000 jobs in March, the third consecutive month of rising
unemployment, presenting a stark sign that the country may already be in a
recession.
Sharp downturns in the manufacturing and construction sectors led the decline,
the biggest in five years. The Labor Department also said employers cut far more
jobs in January and February than originally estimated.
There were fewer jobs in March than there had been five months earlier. In the
last 50 years, whenever there has been an employment downturn like the one of
the last few months, a recession has followed.
The unemployment rate ticked up to 5.1 percent from 4.8 percent, its highest
level since the aftermath of Hurricane Katrina in September 2005. More Americans
looked for work than in February, when many simply took themselves out of the
job market. But employment opportunities appeared sparse.
Stock markets on Wall Street opened flat, as investors hoped that the worst of
the downturn was over.
Economists were less optimistic. The drop in payrolls was worse than feared:
many analysts had expected a decline of 50,000 jobs and an unemployment rate of
5 percent.
“Three months in a row of payroll job losses and a sizable negative revision:
these are clear signs that the job market is in recession,” said Jared
Bernstein, an economist at the Economics Policy Institute. “I’m hard-pressed to
imagine anyone who would raise doubt to that at this point.”
The employment report is considered the most important monthly indicator of the
health of the economy. Many economists were already bracing for a poor report,
and the chairman of the Federal Reserve, Ben S. Bernanke, told Congress earlier
this week that the labor market would continue to soften.
The numbers suggest the Fed will extend its string of rate-cutting when it meets
April 29. Investors expect central bankers to lower the benchmark interest rate
by at least a quarter point, a move that can stimulate growth.
Wage increases continue to fall behind inflation, meaning many employees are
actually earning less than a year earlier. Average hourly salaries ticked up 5
cents, or 0.3 percent, in March, and were running 3.6 percent higher than a year
earlier. But consumer prices rose 4 percent over the same period.
In March, private payrolls dropped for a fourth month, as factories, home
builders and retail outlets all slashed positions. The only increases came in
education and government jobs, as well as the leisure and hospitality
industries.
Employers cut 76,000 jobs in January and February, far more than originally
estimated.
March 8, 2008
The New York Times
By EDMUND L. ANDREWS
WASHINGTON — The worst fears of consumers, investors and Washington officials
were confirmed on Friday, as deepening paralysis on Wall Street collided with
stark new evidence of falling employment and a likely recession.
In a report that was far worse than most analysts had expected, the Labor
Department estimated that the nation lost 63,000 jobs in February. It was the
second consecutive monthly decline, and the third straight drop for
private-sector jobs.
Even before the bad news on jobs emerged, the Federal Reserve was already racing
to ease the latest crisis in the credit markets, where seemingly rock-solid
companies have been caught short because the markets are devaluing the
collateral they had posted to back billions of dollars in loans. Much of that
collateral consists of mortgages.
In a surprise announcement early Friday, the Federal Reserve said it would
inject about $200 billion into the nation’s banking system this month — with
more to come after that — by offering banks one-month loans at low rates and in
return letting them pledge mortgage-backed bonds and even riskier assets as
collateral.
Though monthly payroll data are notoriously volatile and subject to revision,
the jobs report was so bleak that many of the few remaining optimists on Wall
Street threw in the towel and conceded that the United States was already in a
recession.
“Godot has arrived,” wrote Edward Yardeni, who had been one of Wall Street’s
most relentlessly upbeat forecasters. “I’ve been rooting for the muddling
through scenario. However, the credit crisis continues to worsen and has become
a full-blown credit crunch, which is depressing the real economy.”
The convulsions in the credit markets were spurred in part when Thornburg
Mortgage, one of the nation’s biggest independent mortgage lenders, and Carlyle
Capital, the offspring of one of the country’s largest private equity firms,
failed to meet demands by lenders to post more cash or pledge other assets, also
known as margin calls, on debts that had been backed by packages of mortgages.
Fed officials said Friday that they were not pumping money into the system in
response to the poor jobs data but rather to the growing unwillingness or
inability of investors to finance even routine business deals. Fed officials
have long feared that anxiety about credit losses would create a “negative
feedback loop,” or self-perpetuating spiral of rising unemployment, more home
foreclosures and yet more credit losses.
“You have big credit losses that make it harder to get new credit, which means
the economy starts to slow down and foreclosures go up,” said Nigel Gault, a
senior economist at Global Insight, a forecasting firm. “Then you get even
bigger credit losses, which makes banks even less willing to lend and you keep
spiraling down.”
The Fed’s problem is that its main weapons against a downturn — lower interest
rates and easier money — are ill suited to a crisis that stems from collapsing
confidence about credit quality.
Even though the central bank sharply cut short-term interest rates twice in
January and clearly signaled that it would cut them again on March 18, rates for
home mortgages have risen and rates for many forms of commercial loans have
jumped sharply.
“There has been a tug of war under way between deteriorating credit conditions
and monetary policy,” wrote Laurence H. Meyer, a former Fed governor and now a
forecaster at Macroeconomic Advisers. As a result, he said, credit conditions
have remained almost as tight as ever.
The darkening economic outlook, coming just nine months before presidential
elections, puts enormous pressure on President Bush and could pose a problem for
Senator John McCain, the presumptive Republican nominee for president.
Typically, the party in power has not been able to hold onto the White House
when the economy is in a recession in an election year.
President Bush, in a hastily arranged appearance before television cameras on
Friday afternoon, acknowledged that the economy had slowed but predicted that it
would get a lift this summer from the $168 billion stimulus package of tax
rebates and temporary tax cuts that Congress recently passed.
“Losing a job is painful, and I know Americans are concerned about the economy,”
Mr. Bush said.
“The good news is, we anticipated this and took decisive action to bolster the
economy, by passing a growth package that will put money into the hands of
American workers and businesses.”
Edward P. Lazear, chairman of President Bush’s Council of Economic Advisers,
said the White House had downgraded its earlier forecasts but still believed
that the tax rebates of up to $1,200 for many families will help the economy
escape a recession.
“There is no denying that when you get negative job numbers, realistically the
economy is less strong than we had hoped it would be,” Mr. Lazear said. “The
question is how quickly will it pick up. We think it will pick up — as I
mentioned, we think it will pick up by the summer.”
Few private forecasters were so buoyant. Many firms had already concluded that a
recession was under way. Within minutes of the new report on employment, many in
the dwindling pool of optimists changed their positions.
Mr. Yardeni was hardly alone. Just one minute after the Labor Department
published its report at 8:30 a.m., JPMorgan Chase reversed its stance, declaring
that a recession appeared to have begun. Lehman Brothers switched its position
as well.
Unemployment typically starts to rise only after a recession has started, and it
keeps climbing for many months after the economy has hit bottom and begun to
recover.
Paul Ashworth, an economist at Capital Economics, noted that private-sector
payroll employment has now declined by an average of 47,000 a month — a decline
that has been followed by a recession every time it has happened in the last 50
years. In each of those recessions, Mr. Ashworth added, the job market recovered
only after monthly job losses peaked at 200,000 jobs.
Ben S. Bernanke, chairman of the Federal Reserve, had already sent clear signals
in recent weeks that the central bank was ready to reduce the overnight federal
funds rate when policy makers meet on March 18.
Since August, the Fed has sharply cut overnight rates five times, to 3 percent
from 5.25 percent, and investors have been all but assuming that the central
bank would reduce them by at least another half a percentage point, and perhaps
three-quarters of a point, at the next meeting.
But by Thursday, Fed officials had become increasingly alarmed that rates for
many kinds of lending were skyrocketing as investors demanded steep risk
premiums that are normally associated with a serious economic recession.
What particularly alarmed Fed officials was that the margin calls on Carlyle
Capital and Thornburg Mortgage had stemmed from plunging confidence about the
value of highly conservative mortgages that were guaranteed by Fannie Mae and
Freddie Mac, the giant government-sponsored mortgage companies.
If investors lose confidence in Fannie Mae and Freddie Mac, which have become
the only major remaining source of mortgage financing in recent months, Fed
officials fear that home sales and housing prices could plunge further and
foreclosures could climb even higher than they already have.
On Thursday, the Mortgage Bankers Association reported that about 7.9 percent of
all loans — a record high — were past due or in foreclosure. Until the third
quarter of last year, the rate had not climbed above 7 percent since 1979.
Home prices are falling in almost every part of the country, a phenomenon that
Fed officials and many other experts until recently thought was all but
impossible, and some analysts now predict that average home prices will
ultimately fall 20 percent from their peak in 2006.
The effect is reducing household wealth. According to data this week from the
Fed, net household wealth declined by $900 billion in the fourth quarter of last
year.
Indeed, the ratio of homeowners’ equity to the value of their homes fell below
50 percent for the first time in history last year, according to the Fed. Far
more alarming, however, is that about 30 percent of all homes bought in 2005 and
2006 are “under water,” meaning they have mortgages that are higher than their
resale value.
“We’re at the beginning of the bursting of the housing bubble,” said Dean Baker,
co-director of the Center for Economic and Policy Research, a liberal research
organization in Washington. “The rate of foreclosures is just going to increase
as time goes on.”
Eric S. Rosengren, president of the Federal Reserve Bank of Boston, noted that
the housing calamity thus far has occurred even though unemployment is still
low, at just 4.8 percent. But a surge in joblessness would almost certainly lead
to more foreclosures and more downward pressure on home prices.
“A downside risk that we do need to consider is whether a rising unemployment
rate generated by slow growth will force some people to sell their houses,
creating further downward pressure on housing prices,” Mr. Rosengren said in an
interview.
In opening up its monetary spigots on Friday, the central bank left little doubt
that it wanted to increase the money for mortgage lending.
Its first move was to offer up to $100 billion through the Term Auction
Facility, a program created in December that allows any bank or savings and loan
to bid for loans at what amounts to wholesale rates and allows them to pledge a
wide variety of securities — including mortgage-backed securities that are not
tradable at the moment — as collateral.
The central bank’s other new initiative is to lend an additional $100 billion in
March through its open-market operations. That money is available only to
primary dealers, a few dozen major investment banks, but the loans can be
secured by certain mortgage-backed securities, like those issued by Fannie Mae
or Freddie Mac.
Fed officials said they were prepared to infuse even bigger sums of money into
the financial system if they see a need, and the central bank said it was in
“close consultation with foreign central bank counterparts” — a hint that it
might seek support from other central banks if the credit problems persist.
February 1,
2008
Filed at 3:48 p.m. ET
The New York Times
By THE ASSOCIATED PRESS
WASHINGTON
(AP) -- In a shower of pink slips, U.S. employers cut jobs last month for the
first time in more than four years, the starkest signal yet that the economy is
grinding to a halt if it hasn't already toppled into recession.
Conditions are deteriorating, according to the most up-to-date employment
snapshot by the Labor Department, which showed nervous employers slicing
payrolls by 17,000. The country hasn't seen such a nationwide job loss since
2003, when employers were still struggling to recover from the last previous
recession.
''We are certainly on thin ice,'' said John Silvia, chief economist at Wachovia.
And even President Bush, normally a cheerleader for the economy, said there were
''serious signs'' it was weakening.
Wall Street, however, took the news in stride. Stock prices were up near the
close of the trading day.
Job losses were widespread in January. Factories, construction companies,
mortgage brokers and real-estate firms were among those eliminating jobs --
casualties of the housing bust and credit crunch. The government cut jobs for
the first time since last July.
All those cuts swamped job gains in education, health care, retailing and
elsewhere.
The unemployment rate actually dipped slightly to 4.9 percent, from 5 percent in
December, as people left the labor force.
''Discouraged by a sluggish job market, many more adults are sitting on the
sidelines,'' said Peter Morici, an economist and business professor at the
University of Maryland.
Wage growth also slowed, another indication of belt-tightening. Smaller wage
gains could make people who still have jobs -- already squeezed by high energy
prices -- reluctant to spend, further hurting the economy.
President Bush prodded Congress anew to quickly pass an economic rescue package.
''There's serious signs that ... the economy is weakening and that we've got to
do something about it,'' Bush said. On Capitol Hill, Democratic and Republican
supporters of a stimulus package -- including tax rebates for people and tax
breaks for businesses -- agreed the gloomy employment report underscored a need
for urgency. The package is pending in the Senate, where there are disputes over
attempts to expand it.
The Democratic presidential contenders, Sens. Hillary Rodham Clinton of New York
and Barack Obama of Illinois, said the job losses were evidence of failed Bush
policies. ''We are sliding into a second Bush recession,'' Clinton said. Obama
called the employment figures ''troubling news'' and urged Congress to extend
unemployment benefits ''for more time and to more people.''
To help ease the credit crisis, the Federal Reserve announced it would provide
cash-strapped banks with an additional $60 billion in short-term loans through
auctions later this month. The Fed started the auctions in December and has
already provided $100 billion in loans to banks.
With fears of recession growing, the Fed has gotten much more aggressive --
ordering two big interest rate reductions in just over a week. A severely
depressed housing market, hard-to-get credit, turbulence on Wall Street and
''some softening in labor markets'' were cited by the Fed when it lowered rates
by a bold half-point on Wednesday. The weak employment report would justify
additional rate cuts, economists said.
The health of the nation's job market is a critical factor shaping how the
overall economy fares. If companies continue to cut back on hiring and put a lid
on wages, that will spell more trouble.
People running companies are concerned.
''They are thinking if there is some capital spending I should postpone for a
while, I should do that. If there is some hiring I don't necessarily need to do
right now, I can put that off for a few months to see what happens,'' said Joel
Naroff, president of Naroff Economic Advisors. ''The problem with that thinking
is that more economic weakness or a recession can become somewhat of a
self-fulfilling prophecy.''
Average hourly earnings for jobholders rose to $17.75 in January, a 0.2 percent
increase from the previous month. It was half the pace logged in December. Over
the past 12 months wages went up by 3.7 percent. With high energy and food
prices, though, workers may feel like their paychecks aren't stretching as far.
The unemployment rate had shot up in December to 5 percent, from 4.7 percent in
November. The magnitude of that increase -- something not seen since right after
the September 2001 terror attacks -- set off alarms. In the past, such a big
increase has signaled the economy was starting a recession or already in one.
With economic growth slowing this year, the unemployment rate will climb again.
In fact, Mark Zandi, chief economist at Economy.com, predicts the jobless rate
will rise to near 6.5 percent in early 2009.
The 17,000 drop was in total payrolls -- both government and private employers
-- in January, the first monthly decline since August 2003. The government
sliced 18,000 positions, while private employers added just 1,000, the fewest in
nearly a year.
The government on Friday also released annual revisions -- based on more
complete information -- that showed job creation was even weaker last year than
initially thought.
The economy added an average of just 95,000 jobs per month in 2007, versus an
earlier estimate of 111,000 a month. In 2006, payroll employment grew by an
average of 175,000 a month.
Construction and factory workers have been especially hard hit by the meltdown
in housing, which has catapulted home foreclosures to record highs. Construction
companies cut 27,000 jobs last month and have lost 284,000 since employment
peaked in September 2006. Spending by private builders on housing projects last
year plunged by a record 18.3 percent, the Commerce Department said in a
separate report.
Factories eliminated 28,000 positions in January, and have cut 269,000 jobs over
the past 12 months. Manufacturing activity gained some ground in January, after
contracting in December, the Institute for Supply Management said in still
another report Friday.
The economy nearly stalled in the final three months of last year, and some
economists believe it may actually be shrinking now.
Under one rough rule, the economy would have to contract for six months for the
country to be considered in a recession. The likelihood of a recession has risen
sharply over the past year, and analysts increasingly believe the U.S. will be
in one during the first half of 2008. The worry is that people and businesses
will hunker down and pull back their spending, sending the economy into a
tailspin.
Bush said, ''We're just in a rough patch. And, I'm confident we can get through
this rough patch.''
February 1,
2008
The New York Times
By MICHAEL M. GRYNBAUM
The economy
lost 17,000 jobs in January, the Labor Department reported on Friday, the first
decline in four years and the most striking evidence yet that the United States
may be slipping into a recession.
Jobs disappeared across a broad spectrum of professions, with the steepest
losses coming in the manufacturing, construction and goods-producing industries.
The unemployment rate, after jumping to 5 percent in December, fell back
slightly, to 4.9 percent.
“This is the clearest signal yet that the job market is either in or teetering
on a recession,” said Jared Bernstein, senior economist at the liberal Economic
Policy Institute in Washington.
With the collapse of the housing market, trouble on Wall Street and the
continuing fallout of the subprime mortgage crisis, many economists have pointed
to the continued growth in the labor market as the final holdout in a sluggish
economy.
But the employment report puts the job market in a startlingly different light.
Economists had predicted a substantial gain in January payrolls, and early signs
pointed to a relatively strong report. Instead, the government reported the
first decline in jobs since August 2003.
“There’s a race going on between an economy that’s gathering weakness and
aggressive monetary and fiscal policy,” said Ethan Harris, chief United States
economist at Lehman Brothers. “Whether we have a recession in the U.S. or not
depends on which of these two forces moves quicker.”
Mr. Harris noted that the employment data can be quite volatile from month to
month. The last reported monthly decline, in August 2007, was later revised up
to a 74,000 gain.
Just last month, the December report showed an anemic 18,000 rise in payrolls,
prompting a significant downturn in the stock market. On Friday, the Labor
Department raised that estimate to a gain of 82,000 jobs.
“People were saying the recession started in December,” Mr. Harris said. “Look,
it didn’t. December was fine.”
Still, there were several signs of weakness in the employment report. Payrolls
at private companies increased by a mere 1,000 jobs. Businesses are reducing the
number of hours that their employees work.
And workers’ salaries have effectively fallen in the last 12 months. The average
hourly wage for rank-and-file workers — about 80 percent of the total work force
— rose 3.7 percent since last January, below the pace of inflation.
Average hourly earnings ticked up 0.2 percent last month, slowing from a 0.4
percent rise in December.
The government also sharply lowered its estimates for employment in 2007 as a
whole. In November, for example, the government had said 115,000 jobs were
created. That number was reduced to 60,000 in the latest report.
The jobs report was accompanied on Friday by a batch of mixed economic data.
Manufacturers appeared to recover from a sudden drop in business in December, as
a closely watched indicator — a survey by the Institute for Supply Management —
ticked up on a surge in foreign and domestic demand.
The I.S.M. index had fallen to 47.7 in December, setting off concern on Wall
Street, but that figure was revised up to 48.4. The index was at 50.7 for
January, suggesting that December’s downturn was a momentary blip.
Despite the waves of bad economic news, American consumers were more confident
about the state of the economy in January, according to a survey by the
University of Michigan and Reuters. Consumer confidence rose to a reading of
78.4 from 75.5 in December.
Finally, the Commerce Department reported that spending on construction projects
fell 1.1 percent in December. The decline was mostly due to the problems in the
housing markets, as home builders cut back on groundbreakings in response to
lagging sales. Nonresidential construction was flat for the month.
February 1,
2008
Filed at 11:25 a.m. ET
By THE ASSOCIATED PRESS
The New York Times
WASHINGTON
(AP) -- The number of payroll jobs declines for the first time in more than four
years but the unemployment rate falls. Why the discrepancy?
The difference results from the fact that the two figures come from different
surveys of the labor market.
The unemployment rate is based on a survey of households. It shows the number of
unemployed people looking for work as a percentage of the total number of
persons in the labor force.
The number of payroll jobs created each month is based on survey of payroll data
from businesses and government agencies.
The two figures over time generally show the same trends in the labor market,
but the monthly report can at times diverge because two surveys are being used.
The
unemployment rate surged to 5 percent in December as the economy added a meager
18,000 jobs, the smallest monthly increase in four years, the Labor Department
reported on Friday.
Economists viewed the report as the most powerful indication to date that the
United States could well be falling into a recessionary downturn. Evidence of
widening unemployment heightened anticipation that the Federal Reserve would
further cut interest rates this month, perhaps by an unusually large half a
percentage point, in a bid to prevent the economy from sliding into the muck.
“This is unambiguously negative,” said Mark Zandi, chief economist at Moody’s
Economy.com. “The economy is on the edge of recession, if we’re not already
engulfed in one.”
A recession is typically defined as an extended period of at least several
months during which economic activity shrinks and unemployment rises.
The swift deterioration in the job market resonated as a warning sign that
troubles once confined to real estate and construction are spilling into the
broader economy, threatening the ability of American consumers to keep spending
with customary abandon.
On Wall Street, the report led to a big sell-off that sent the Dow Jones
industrial average plunging nearly 2 percent.
As the presidential race heated up, Democrats seized upon the bleak job numbers
to indict Republican-led economic policies. “This morning’s jobs report confirms
what most Americans already knew,” Nancy Pelosi, the House speaker, said in a
statement. “President Bush’s economic policies have failed our country’s middle
class.”
President Bush cautioned that “we can’t take economic growth for granted” and
said he would work with Congress to be “more diligent” on protecting the
economy. Speaking to reporters at the White House after a meeting with his
economic advisers, Mr. Bush warned that “the worst thing the Congress could do
is raise taxes on the American people.”
The lone consolation for investors, workers and the public at large was that the
bad news seemed severe enough to prod the Fed to push its benchmark rate below
its current 4.25 percent when policy makers meet at the end of the month. Lower
interest rates decrease borrowing costs and encourage banks to lend more freely,
spurring spending, hiring and investment.
The Fed has already eased rates three times since September in a bid to inject
confidence into jittery markets. But analysts cautioned that central bankers may
now feel constrained against further easing: inflation is growing, particularly
as oil hovers near $100 a barrel. Lower interest rates, over time, can generate
the seeds of inflation, and could make an already weak dollar worth less against
foreign currencies.
“The Fed is trying to juggle a two-sided sword,” said Ryan Larson, senior equity
trader at Voyageur Asset Management. “They’re trying to fight inflation moving
higher and they’re trying to fight a slowdown in growth.”
In an effort to encourage lending, the Fed has been pumping cash through the
banking system by auctioning off loans at discounted rates. On Friday, it said
it would expand a pair of auctions scheduled for this month, offering $30
billion.
Some economists said the markets and other analysts were making too much of a
lone jobs report that could yet be revised.
“The stock and bond markets are going into panic mode,” said Michael Darda,
chief economist at MKM Partners, a research and trading firm in Greenwich, Conn.
“We’re going to have a slowdown, but I don’t think we’re going to have a
recession.”
While filings for jobless benefits have been rising in recent weeks, the pace
has not been swift enough to justify such a sharp jump in the unemployment rate,
Mr. Darda added.
For months, the economy had managed to grow vigorously despite worrying
developments, from the unraveling of the housing industry to turmoil in the
credit markets. Through it all, economists marveled at the resilience of the
labor market, suggesting that as long as the economy kept creating jobs by the
tens of thousands each month, Americans would keep spending and growth would
carry on.
But the jobs report for December suggested that the negatives dogging the
economy finally appear to be dragging it down.
“There’s no mystery as to why the unemployment rate went up,” said Robert A.
Barbera, chief economist at the research firm ITG. “The mystery is why it took
so long.”
December’s addition of 18,000 jobs to nonfarm payrolls was an abrupt drop from
the 115,000 created in November — a figure revised on Friday from an initial
estimate of 94,000. It put the annual rate of job growth at its lowest since
2004.
Some areas of the economy continued to expand, according to the report.
Government jobs grew, and health care added 28,000 jobs. Food services added
27,000.
But that growth was largely reversed by pain elsewhere. Retailing lost 24,000
jobs in December. Financial services lost 7,000. Construction shed another
49,000 jobs. Even commercial construction, which some have suggested could
compensate for woes among home builders, lost 17,000 jobs. Over all, private
sector jobs slid by 13,000.
Despite a weak dollar, which has helped compensate for disappointment at home by
lifting American sales abroad, the nation shed 31,000 manufacturing jobs in
December.
For the third consecutive month, wages grew slower than the pace of inflation,
cutting into the real income of many workers. Among rank-and-file workers, who
make up more than four-fifths of the labor force, average hourly earnings rose
3.7 percent last year, below the 4.3 percent rise in 2006.
Job growth has been slowing steadily for two years. In 2005, the economy
generated 212,000 new jobs a month, according to the Labor Department. Last
year, the pace dropped to 122,000.
The spike in the unemployment rate, which was 4.7 percent in November, suggested
that the deterioration of the job market is now accelerating.
Last year, companies fretted about business prospects amid falling housing
prices and tightening credit. Many stopped hiring, but large-scale layoffs were
rare. But now, some appear to have concluded that they can no longer tough it
out.
“December’s bleak jobs report represents the siren call that this business cycle
is just about over,” declared Bernard Baumohl, managing director at the Economic
Outlook Group, in a note to clients. “We’re about to tilt over to the other side
of the economic curve and begin the downsizing.”
In Penacook, N.H., the tilt came during the Christmas season: Riverside
Millwork, a supplier of windows, doors and stair parts, laid off 43 people. That
added to a wave of layoffs that has winnowed the staff from 225 to 40 since
October 2005, when home building began its decline.
“We’ve cut just about everything that we can possibly cut,” said Larry Byer, the
company’s human resource manager. “When you don’t have assets to sell or to keep
you going, the bodies have to go.”
In calculating the rate of job growth, the Labor Department relies upon a
sampling of payroll data and an extrapolation of how many jobs have been created
and destroyed. An accompanying survey of households, used to calculate the
unemployment rate, presented an even bleaker picture, showing that the number of
Americans saying they were working plunged by 436,000 in December — the worst
number in five years.
The trend was pronounced for teenagers, blacks and Hispanics, with unemployment
among those groups jumping 0.6 percentage point, triple the increase for whites.
The household survey is notoriously volatile and treated with skepticism. But
unlike the payroll data, it is not subject to revision, other than for seasonal
factors, making it a better indicator when the economy is on the cusp of change,
Mr. Barbera said.
Between December 2005 and December 2006, the household survey showed jobs
increasing by 2.2 percent. Over the last year, jobs grew less than 0.2 percent.
“Every time we’ve gotten down to this level since 1956, there’s been a
recession,” Mr. Barbera said.
The risk is that the weakening job market will swell from a symptom of malaise
to a cause. As fewer jobs are created, spending power could dry up. Faced with
declining business, employers could further trim payrolls. As unemployment
grows, more homeowners could fall behind on mortgages, leading to more losses at
banks, and more layoffs.
“The risk of a vicious cycle setting in now is very high,” Mr. Zandi said. “The
job market’s operating at stall speed. Either it picks up soon or it quickly
unravels.”
There is a fine 'gated' road
over the fells which is used by tourists passing from Wastwater to Ennerdale
Water. On a dry day you will find at each gate a little knot of young men who
wait idly for hours in the hope of picking up a penny from a motorist. That is
the only contact which a visitor to the Cumbrian Lakes is likely to have with
that other Cumberland, which is one of the distressed areas now being vis ited
by a Government commissioner.
Like much of the northeast coast and of South Wales, industrial Cumberland in
its decline is illustration that there are few more rickety foundations on which
to build a stable community than iron and coal.
The problem of Cumberland is principally due to the increased efficiency of
modern production. Ten years ago there were iron-producing plants at Maryport,
Harrington, Distington, and Cleator Moor as well as at Workington; now
production is concentrated in this last town.
Cleator Moor grew up as an ironstone-mining centre. It was ill-built at a time
when ugliness was unconsidered. The men have now no work to do and no prospect
of obtaining any.
To the outside observer there would appear to be nothing to keep the unfortunate
victims of the economic collapse of Cleator Moor from gladly accepting any
opportunity of leaving the district. It is, however, home to its own people, and
the many attempts which have been made to transfer workers to other districts
have not been particularly successful. The Cleator Moor Labour Exchange area was
scheduled as depressed in June, 1928. Until June, 1932, 556 men were found work
outside the district. By the end of that period 445 of them had returned home.
In this experience Cleator Moor is not exceptional in Cumberland nor Cumberland
among distressed areas. Men may be persuaded to move away if there is work for
them to go to, although even then they sometimes find the new surroundings so
strange and uncongenial that they will walk back home to unemployment. It seems
almost impossible to persuade men to stay away once they fall out of employment.
A man, for instance, goes to work in Kettering. He loses his job and returns
home. 'Where else should I go but home?' he asks. Yet the chances of getting
work again in Kettering after an interval of unemployment are good; in
Cumberland they are negligible.
The tragedy of a derelict area is that love of home, the English virtue, becomes
a vice which must be extinguished if the people are not to perish.
Lord Leverhulme
[the soap magnate, philanthropist, founder of what is now Unilever] last night
was the guest of the Manchester Rotary Club, and the chief subject of his
address was the question of the six-hour working day.
He laid it down
as a guiding principle that when the standing charges of an industry were equal
to the wage bill, the change from eight to six hours could be made without loss,
even though no increase resulted in the efficiency of the workers.
This was provided that the machinery was worked for two shifts. Where the
standing charges were less than the wages, the change would lessen the cost of
production. In the few industries, like agriculture, where the standing charges
were more than the wage bill, we should have to wait for a fuller use of
machinery.
As soon as most of our farming operations were done by machinery, agriculture
would become an industry in which a reduction of hours must be made for
economy's sake, because the best could not be got out of machinery by jaded
labour.
As a concrete example of the effects likely to follow the change from a shift of
eight hours to two of six, Lord Leverhulme took the cotton industry, which, he
said, was not the most favourable case, because its standing charges and its
wage bill were practically equal.
The change here, assuming the same wages for six hours as for eight and the same
efficiency of workmanship, would result in an unchanged cost of production. But
the whole history of industrial development and the experience of those who had
recently made the experiment led to the belief that workpeople would produce
about as much in a six- hour day as they produced in an eight-hour day.
If this was so, it would mean a saving in the cost of production which would
enable the workman's wage to be raised 33 1/3 per cent and the price of the
product to be reduced 20 per cent. The employer, he thought, would not need any
of the money saved, because he would have increased his output without
increasing his capital.
Under these conditions, Lancashire, even with an Indian tariff against it, could
overcome all competition in the world's markets. The workmen in the cotton
industry had blocked their way to shorter hours because they would not listen to
the idea of two shifts.
The Mayor, Bishop Welldon and Mr. R. B. Stoker, M.P., were also guests of the
Rotary Club.
North, south, east, and west I
find that men are physically weary, nervously exhausted, and spiritually
depressed. Although the number of active pacifists is negligible, there is
everywhere a great longing for the end of the war and the return to peaceful
ways.
The hours worked for nearly three years have been long. Seven shifts a week
continue to be the rule in some places. I heard of one large works in Scotland
where men are working 90 hours a week. A working week of from 70 to 80 hours is
common.
The arrangement to pay men mealtimes in order to keep the machinery running
incessantly involves taking food quickly and there is not even a dinner-hour
relaxation of mind and body. The continuous strain has produced a chronic state
of nerves. What I have described as spiritual depression may be in part a
reaction from the physical condition.
It is also a consequence of the falling away of the ideals that swayed men's
minds when the war began, and the obsession with the horrors of the conflict and
the troubles of workshop and home. Desire for peace is very real, but it is a
desire with little hope.
Perhaps the most difficult necessity is to promote confidence in the Government.
The decision to abolish leaving certificates and to require arbitration awards
to be made within a fortnight will ease two causes of irritation. If the
Government will restore 'freedom of action' to trade unions they will probably
get rid of many legitimate workshop grievances.
A change is coming over the mind of workers and new aspirations are shaping
themselves. I could not fail to be impressed by the assumption everywhere that
after the war the worker must have a real share in control of workshop
conditions. This is a fixed and positive idea. There is in most localities an
equally confident belief in the continuance of the shop stewards system. It will
be necessary for unions to capture the shop stewards organisation or it will
capture them.
One thing about which it is impossible to be definite is the influence that will
spread in this country from the Russian revolution. Something will most surely
come of it, and in an uncertain way one gets to feel that the forces which made
for revolution in Russia are stirring here too, but vaguely.
However that may be, the plans that are made to allay unrest in the skilled
engineering trades must take account not alone of particular grievances alleged,
but also of the altered state of mind and the new thought among the workers.
The scene of the riots at Featherstone, near Pontefract, which extended until
after midnight, was yesterday morning one of desertion and desolation. The town
of Featherstone was almost all in mourning.
It was about nine o'clock on Thursday night when the South Staffordshire
detachment first fired on the mobs which were besieging the colliery of Lord
Masham and were charging the soldiers with stones. The first shot was only by
one file of two men, and these did not take effect. Shortly before ten o'clock
one section of the Staffordshires fired two volleys.
So far as could be ascertained seven of the mob were hit. James Gibbs, of
Loscoe, was shot through the breast, and expired. James Perkins, knee shot away,
died yesterday.
It was eleven o'clock on Thursday night before the Staffordshire were reinforced
by detachments of Yorkshire Light Infantry and York and Lancaster Regiment,
whose duty did not extend beyond that of keeping the crowd off the colliery
premises.
Mr. Bernard Hartley, the magistrate who was pelted with stones whilst reading
the Riot Act, was little the worse yesterday. Another death is now reported. The
victim, one of the miners shot, named Tomlinson, was a Normanton man.
Throwing Away Sympathy
It is with a kind of despair that those who have hoped that this dispute might
end with some concession on the part of the coal-owners now see a small reckless
percentage of the colliers throwing away tactical advantages. Hitherto public
sympathy has been remarkably evenly divided between the parties. The miners'
refusal of arbitration has been resented by many; the abrupt and tactless demand
of the coal-owners for a heavy [wage] reduction "in one piece" has been resented
by about as many more.
But riots like this bring a mass of fresh public opinion to bear. The miners
appear as wanton robbers and destroyers, the coal-owners as law-abiding men
subjected to cruel injury.
For the sake of the miners and of trade unionism itself, we hope that every
repetition of these blundering crimes will be repressed with more common sense
than when soldiers were helplessly looking on for want of a magistrate to read
the Riot Act.
Mr. Whitworth's contract for cleaning the streets of the
township of Manchester with his Machines having expired on Friday last, the
hand-sweeping under the direction of the lamp and scavenging committee commenced
on Saturday last.
There are, in all, 142 men employed under the direction of Mr.
Wallworth, the superintendent. The township is divided into four districts, each
of which is placed under the control of an inspector, and is divided again into
three sections.
To each of these sections are allotted nine men:- one leader, two fillers, and
six sweepers. Twenty carts, including four dust carts (in the early part of the
morning), are employed in removing the sweepings, so that with the 20 carters
thus employed, and with one grid-opener for the whole township, and with nine
yardsmen (the same number as were employed during Mr. Whitworth's contract), the
total number of the men employed under Mr. Wallworth is, as we have stated
above, 142.
The men employed are able-bodied- men, selected by the committee, after a
personal inspection, from about 500 applicants. Part of them were able-bodied
paupers who have been accustomed to outdoor work.
There are also amongst them a number of night-soil men, who have been thrown out
of employment by the corporation undertaking the emptying of the ashpits. Their
wages are at present 11s. 9d. a week for leaders; 13s. 3d. for fillers and 12s.
6d. sweepers.
But we cannot help thinking that although the committee may obtain the services
of able-bodied men for these wages in the present depressed state of the times,
and general difficulty of finding employment, they will find it difficult to do
so when the trade of the district is in a more favourable state.
The hours of labour of the scavengers will be from five o'clock in the morning
till five o'clock in the evening, one hour being allowed for breakfast and
another hour for dinner.
The committee have had under a trial a number of different patterns of brooms.
The brush part of the one now in use is eighteen inches long, and is composed of
four rows of the Brazilian weed used by Mr. Whitworth in his machines, set in a
strong piece of wood.
It is so contrived that the handle may be fastened to either side of this, and
that consequently the brush may be worn equally on both sides. Of the success or
otherwise of these arrangements in preserving the cleanliness of the streets, it
is, as yet, too early to speak.
