Gathering Gloom for Workers

By Charles Alexander

A spreading slump swells the long gray line of the unemployed

Allis-Chalmers to lay off 1,300 in Missouri . . . Smith-Corona to suspend output at three plants employing 3,450 . . . Pennzoil to shut down all its copper and molybdenum operations.

The business-page headlines last week were a relentless reminder of the gathering force of the current U.S. recession. With each passing day, the industrial landscape is increasingly marred by padlocked factory gates and smokeless smokestacks. Spreading from cotton mills in Georgia to lumber camps in Oregon, the slump has swiftly swelled the ranks of the jobless. The Labor Department announced last week that November's unemployment rate rose again, to 8.4%, the highest level in six years, up from 8% in October and 7% in July. This means that about 9 million Americans and their families are facing the Christmas holidays without paychecks. Says Steve Kelly, 25, who was laid off by a sawmill in Horse Shoe Bend, Idaho, and must now support his wife and son on a $525-a-month unemployment benefit: "There's not much a guy can do. We have payments on the car, pickup and house. After we buy food, we just pay some bills if we can. And if we can't, well, we just can't."

The trauma may grow much worse. The Commerce Department reported last week that its index of leading economic indicators, which predicts future business trends, fell a steep 1.8% in October. Most forecasters, including Murray Weidenbaum, President Reagan's chief economic adviser, believe that unemployment will rise to about 9% before it eases next year, when business picks up again. That would equal the postwar record high set during the severe 1973-75 recession.

The downturn has been most devastating in two industries particularly sensitive to high interest rates: autos and housing. Car production in December is scheduled to be 21% below last year's already depressed levels. The big automakers and their suppliers have laid off some 600,000 employees. With housing starts at their lowest level in 15 years, the National Association of Home Builders estimates that 20% of the nearly 5 million U.S. construction workers will be out of work this winter.

Industries that provide materials to the automakers and homebuilders are also in serious trouble. Steel companies have idled about 50,000 employees, and the rubber industry has laid off some 10,000. The timber business has toppled. In Oregon alone, 22,000 lumber workers have lost their jobs. Governor Victor Atiyeh has declared the industry to be in a "state of emergency" in an effort to qualify local businessmen for federal relief loans.

The slump is moving rapidly to industries as diverse as clothing and chemicals, furniture and food processing. Even high-technology firms, which once thought themselves to be immune from recession, are starting to feel squeezed. Two weeks ago, Nixdorf Computer of Waltham, Mass., let go 250 employees, or 11% of its work force. The division of Exxon that makes computerized typewriters and other office gear announced last week that it was dismissing a fifth of its employees and shutting down a factory in Orlando, Fla.

As always, the unemployment burden has fallen with disproportionate weight on those with the fewest skills and the least work experience. The jobless rate for blacks is 16.8%, a postwar record. In Detroit, where 26% of blacks are unemployed, despair runs especially deep. Says Leroy Johnson, 24, a welder laid off by Chrysler: "I haven't had any way of getting money together. I'm just wondering what to do." For Detroit's black teenagers, unemployment has surged to 68%, and community leaders fear that they are sitting on a smoldering powder keg of urban unrest.

Though joblessness is still most prevalent among blue-collar workers, white-collar executives are becoming increasingly vulnerable. Trans World Airlines has trimmed its management staff by 21% since June, laying off 332 workers. General Motors said last week that it was reviewing its salaried staff. Company insiders expect that perhaps as many as 13,000 white-collar GM employees will get the ax.

For older workers, both blue-collar and whitecollar, the specter of unemployment is chilling. Bill Collett, 54, of Melrose Park, Ill., has been searching futilely for a decent job since last January, when he was laid off as a quality control inspector at International Harvester. Says he: "Employers keep telling me I'm overqualified, but I know it's my age." This week he will apply for work as a part-time locker-room attendant at a suburban Chicago Y.M.C.A.

The unemployed can expect little in the way of new Government programs from Washington. In sharp contrast to the situation in past recessions, the President and Congress are preoccupied with budget cuts and slowing inflation rather than fighting unemployment. Says Alan Greenspan, chief economic adviser to President Ford: "What I find startling about this downturn is that so few politicians are calling for federal job training or the extension of unemployment benefits. Five years ago, politicians would have been stumbling all over themselves to demand antirecession spending."

The Administration's only short-term strategy to combat the slump appears to be a series of polite public statements by President Reagan and Treasury Secretary Donald Regan recommending that the Federal Reserve Board loosen slightly its iron grip on the money supply. The board seems to be complying. Money growth has been up sharply in the past few weeks, and interest rates are finally falling. Last week the board lowered the discount rate, which is the interest it charges on loans to banks, from 13% to 12%.

Yet the cost of money is unlikely to sink much lower. Both the Reserve Board and the Administration are committed to avoiding a rapid expansion of the money supply that could rekindle inflation. Most economists believe that the expected economic recovery next year will be gradual, at best. They predict that unemployment will still be in the 8% range at the end of 1982.

While the Administration had hoped to avoid a recession, it is now counting on the slowdown to curb the outsize wage demands that have helped fuel inflation in recent years. There are signs that labor unions are indeed holding their fire. The Teamsters, who struck the major trucking companies two years ago and garnered a 31.5% pay hike, have promised to be "reasonable" in next year's negotiations with their employers.

Labor units at particularly distressed companies have accepted actual pay reductions. Employee groups at several airlines, including Pan American and Braniff, have agreed to a 10% wage slash. The United Rubber Workers union will forgo cost of living increases at a new Goodyear plant to be built in Akron.

But other labor negotiators have balked at making exceptional sacrifices. The Transport Workers Union, for example, has flatly rejected a proposed pay freeze at American Airlines. Says James Jackson, president of TWU Local 513 in Dallas: "Before I would consider recommending a pay cut to our members, I would have to see Al Casey and Bob Crandall [American's two top executives] waving tin cups on Main Street."

Most labor leaders feel that their union members, particularly the unemployed, are being unfairly drafted as foot soldiers in the fight against inflation. As a result, the labor officials have been loudly critical about the Administration's policies of budget cutting and tight money. In an attempt to ease tense relations between unions and the White House, Reagan last week invited the executive council of the AFL-CIO, headed by President Lane Kirkland, to the Oval Office for a quiet chat. As a gesture of reconciliation, Reagan suggested that he might allow some of the former air-traffic controllers who were fired during their strike last summer to reapply for Government jobs, though not at their old posts in control towers.

The union leaders, however, demanded much more from Reagan. They urged the President to call for an emergency antirecession offensive that would include public works programs, new housing projects, more Government jobs and a new Reconstruction Finance Corporation to revitalize industry. Predictably, the President did not indicate that he was about to change his economic policy.

Throughout his political career, Reagan has steadfastly believed that the key to prosperity is a dramatic curtailment in the Government's role in the economy. As the recession deepens and the unemployment rolls grow in the coming months, the President's hands-off resolve will be severely tested. --By Charles Alexander. Reported by Gisela Bolte/Washington and Patricia Delaney/Chicago

With reporting by Gisela Bolte/Washington, Patricia Delaney/Chicago

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