September 1, 2003
Looks Like a Recovery, Feels Like a Recession
ven though the recession ended nearly two years ago, polls show that American workers are feeling stressed and shaky this Labor Day because the nation continues to register month after month of job losses and wages are rising more slowly than inflation.
One factor above all has fueled the insecurity: the nation has lost 2.7 million jobs over the last three years. The recovery has been so weak since the recession ended in November 2001 that the nation's payrolls are down one million jobs from when economic growth resumed.
Indeed, the current economic expansion is the worst on record in terms of job growth. The average length of unemployment, more than 19 weeks, spiked this summer to its highest level in two decades.
"American workers are doing very badly," said Carl Van Horn, director of the Heldrich Center for Workforce Development at Rutgers University. "All the trends are in the negative direction. There's high turnover, high instability, a reduction in benefits and a declining loyalty on the part of employers. At the same time, expectations for productivity and quality are going up. It's a bad situation from a worker's standpoint."
In August, a Gallup poll found that 81 percent of Americans thought now was a bad time to find a quality job, tying March for the highest percentage since Gallup began regularly asking the question two years ago.
A new survey by the University of Michigan found that while workers were showing somewhat less fear about unemployment, they were voicing concern that their wage increases were shrinking.
"Most workers expect the economy to improve, but at the same time they don't expect to have their income or their wages increase," said Richard Curtin, director of surveys at the University of Michigan. "It's a very untypical environment."
Weekly earnings for all private-sector workers, after accounting for inflation, have slid for the last seven months, down two-tenths of one percent so far this year, the Bureau of Labor Statistics has reported. A new study by the Economic Policy Institute, a research group financed by foundations and labor unions, found that hourly after-inflation wages had slipped across the board for most workers.
But Labor Secretary Elaine L. Chao predicted that job creation would soon improve, and along with it, worker optimism.
"We're on the road to recovery, but obviously the president and this administration are deeply committed to accelerating the recovery so that everyone who wants to work can find a job," Ms. Chao said Friday in an interview.
Democratic presidential candidates have seized on the nation's weak job performance to assert that President Bush appears on the way to having the worst record of job creation of any president since Herbert Hoover.
"What's unique about the economy today is that even though the recession started in March 2001 and ended apparently in November 2001, here we are in August-September of 2003, and we have far fewer jobs than when we started this whole process," said Lawrence Mishel, president of the Economic Policy Institute. "That has never happened since the Great Depression."
A survey of 1,015 adults conducted by the Heldrich Center at Rutgers in June found that 18 percent of all American workers reported being laid off in the last three years.
Like other administration officials, Ms. Chao said Mr. Bush had inherited the recession and weak job growth.
She added that the terrorist attacks of Sept. 11, 2001, and
Ms. Chao said the president's tax cuts had stopped the slump from growing worse and would soon fuel growth and job creation. As evidence of growth, she pointed to the report Friday that the economy expanded by 3.1 percent in the second quarter.
"We're still in the middle of this presidential term, and as we see the economy grow and this recovery gain momentum, we expect more job creation will occur," she said.
Unemployed Americans are not feeling so optimistic. John I. Brown has been unable to find another permanent job since he was laid off 15 months ago by a TRW factory in Cleveland that makes valves for automobile engines.
"I feel bitter," said Mr. Brown, who earned $14.50 an hour as an inspector at the plant and worked there for five years. "Every week I send out three or four applications, but it's not easy. Every time I look around, there's another company going out of business or going overseas. Even white-collar workers have been losing their jobs."
Like many Americans, Mr. Brown feels victimized by the global economy. TRW closed the Cleveland plant and is looking to Mexico and Brazil to obtain valves more cheaply.
Dallas Salisbury, president of the Employee Benefit Research Institute, said, "To the degree that workers in this country are under stress, it's because of global competition and the shift of jobs out of the United States to labor markets where far less can be paid to make the same product."
Manufacturing has been the hardest hit sector of the economy, losing 2.5 million jobs since Mr. Bush took office. This 15 percent drop in manufacturing jobs, political experts say, could create difficulties for Mr. Bush next year in industrial swing states like Pennsylvania, Ohio, Michigan and Wisconsin.
Largely because of problems in manufacturing, the number of Americans unemployed for more than 26 weeks has soared to nearly two million, triple the level when the recession ended.
The weak job market has upset so many Americans partly because the college-educated have been hit hard, just as workers who do not have a high school diploma. Spurred by the downturn in the information technology and financial sectors, the jobless rate for college graduates is up 1.5 percentage points from early 2001, compared with a 2 percentage point increase for those without a high school diploma.
Martin Regalia, chief economist for the United States Chamber of Commerce, warned that the economy's troubles should not be overstated and predicted that the jobless rate would start declining by year's end.
"If you compare the unemployment rate today — 6.2 percent — with this point after the recessions of the early 90's and early 80's, it was much higher then," Dr. Regalia said. "Are things as good as they should be? No. Are they as bad as some people portray? No."
Dr. Regalia noted that when benefits like health coverage were included, overall employee compensation was rising.
To many economists, perhaps the most vexing aspect of the economic recovery is that while productivity is growing, workers are enjoying few of the benefits.
A study by the Economic Policy Institute found that for low-wage workers (those in the 10th percentile) real hourly wages dropped by seven-tenths of one percent in the first half of this year, for workers in the middle (50th percentile) wages fell one-tenth of one percent, and for workers near the top (90th percentile) wages fell by 1 percent.
"We're having good productivity increases without jobs or wages growing." Dr. Mishel said. "That doesn't really help American families so much."
Lawrence Katz, a labor economist at Harvard, said that even though the labor market was weak and real wages were slipping, workers were better off than in the mid-1990's, largely because of the boom in the late 1990's.
"Wages have done very poorly the past couple of years, but wages did very well from 1996 to 2001," Dr. Katz said. "That was the only time they did really well in the last 25 years because of the low unemployment rate and huge growth in productivity."