The Great American LAYOFFS You call this a recovery?

By John Greenwald

The ax just keeps falling on the beleaguered American worker. In a new round of layoffs that underscored the weakness of the economy last week, three major oil companies announced painful business restructurings. Amoco said it will cut 8,500 jobs, or nearly 16% of its work force, as it abandons unproductive oil fields and writes off other assets. Unocal plans to eliminate 1,100 of its 17,000 jobs worldwide, mostly in the U.S. And Mobil said it is paring 2,000 salaried jobs, or 9.5% of that group. The energy giants joined such diverse blue-chip companies as Hughes Aircraft and Aetna in declaring sharp cutbacks in this summer of economic discontent.

How long can this keep up? Technically at least, the recession was supposed to have ended a year ago. But the relentless pace of new layoffs, along with ! the surge in unemployment from 7.5% in May to an eight-year high of 7.8% in June, has mooted the normal distinction between a recovery and a slump. The harsh reality is that the U.S. remains mired in a prolonged period of stagnation that threatens to drag on for years. Companies have restructured, whole industries have scaled back their work forces, and staying lean has become embedded in the corporate consciousness. "This is the end of the post- World War boom era," says employment analyst Dan Lacey, who publishes the newsletter Workplace Trends. "We are never going to go back to what we knew. This is a permanent dismantling of corporate bureaucracies."

There are few bright spots amid this job gloom. While some parts of the economy -- notably the health-care industry and state and local government -- are adding workers, most American firms are making cutbacks a way of life. Even as students, new graduates and other job seekers poured into the labor market, the U.S. lost a disheartening 117,000 jobs in June. So far this year, corporate America has shed an average of 1,500 positions a day. Says Mitchell Fromstein, president of Manpower Inc., the largest U.S. temporary help service: "In any company with more than 1,000 employees, it's almost a given that some kind of restructuring is taking place. At best, they are just not hiring and losing head count by attrition."

The new unemployment is rooted in trends that began in the 1980s, when harried companies slashed payrolls to lower costs and meet increasingly fierce competition from abroad. Now, in a classic Catch-22 situation, U.S. firms are continuing their cutbacks partly because shell-shocked consumers are fearful of losing their jobs and are thus reluctant to spend. "The insecurity keeps everyone in limbo," says Audrey Freedman, president of the Manpower Plus consulting firm. "No matter what the mortgage rate is, people don't want to buy houses, trade up or commit funds. I think we're entering a decade or more in which the standard of living is not going to grow."

There are lots more reasons why few firms are willing to hang out HELP WANTED signs. The mountain of debt that everyone from consumers to corporate chieftains took on in the '80s continues to hobble spending, and it forces companies to keep tight control of costs. At the same time, the overbuilding binge that glutted America's skylines with vacant buildings has pushed the construction industry into a depression and helped precipitate a general credit crunch. And the end of the cold war means that defense contractors could slash as many as 900,000 jobs over the next six years.

Given all this malaise, there seems little chance for any substantial improvement in the job picture soon. Joseph Jannotta, chairman of Jannotta, Bray, a leading Chicago-based outplacement firm, estimates that fewer than 25% of U.S. companies have completed the task of downsizing their work forces. As the process rolls on, he says, the average firm could eliminate as much as 25% of its current payroll. That means the U.S. could face up to five more years of job losses at the searing rate of 375,000 a year. "We still have whole functional divisions disappearing within a business," Jannotta says. "Middle-management levels of accounting, control and strategic planning are vanishing."

That will be particularly tough on layoff victims because many of the positions they lose are unlikely to reappear. "We've never been in a situation quite like this," says Janet Norwood, the former U.S. commissioner of labor statistics. "It used to be that when we had a recession, everyone would wait to be rehired. But the psychology now is that many of these jobs are not going to come back." White-collar workers are feeling the pinch as never before. Harvard economist James Medoff points out that white-collar employees constitute 36% of the country's unemployed workers, compared with 22% during the 1982 slump.

Even companies that are expanding see little reason to add new workers. That is partly because many firms have streamlined their operations and need fewer bodies, but also because firing -- not hiring -- has become the corporate norm. While Chrysler said last week it is investing $225 million to build a new line of Dodge pickup trucks in 1993, the company noted that it plans to add just 70 new jobs as a result of the program. "We're expecting to triple truck sales, and we're looking for a return to profitability," says a senior Chrysler executive. "Life is going to get a lot better. But we're still going to be laying off people."

In Atlanta, BellSouth eliminated 3,000 jobs, or about 3% of its work force, through early retirement last year. But even if the economy should rebound sharply, the regional phone company has no plans to take anyone back. "We've got to be a more efficient, more streamlined operation," declares a company spokesman. "And this is a long-term step toward getting us there." BellSouth is hardly the only phone company cutting back. Bell Atlantic said last week it is eliminating 3,450 positions, or about 5% of its remaining jobs, as part of a downsizing that the company has had under way since 1984.

This less-is-more stance has placed heavy physical and emotional strains on those workers fortunate enough to keep their jobs. Though both the length of the average workweek and the number of overtime hours dipped a bit in June, the twin indicators of how long and hard people work had reached record levels in recent months. At the same time, the financial rewards of work have continued to dwindle. When adjusted for inflation, the average hourly wage of U.S. workers stands 14% lower than in 1979. And male college graduates who were just beginning their careers earned 5.1% less in inflation-adjusted dollars last year than their counterparts made a decade ago.

For the unemployed, the wait for a new job has been steadily increasing. Jannotta notes that executives who had earned at least $100,000 before losing their jobs now take an average of seven months to place, compared with five months a year ago. For middle managers, the search has lengthened from three months to four. That is for the lucky ones. Outplacement specialists say at least 10% of all those seeking jobs are unable to find them, up from 2% last year. "For the first time, we are really dealing with the guy who is unemployable and structurally out of work," Jannotta concedes.

With so many applicants to choose from, many employers have become picky to a fault. "The companies that are looking for people right now want God," says Jack Curphey, president of Curphey & Malkin Associates, a Los Angeles placement firm. "They want the perfect person, someone who can bring something to the table immediately. Before, if you had a good background and a good reputation, the company would train you to sell their product. No more."

Those unable to get jobs elsewhere sometimes return as part-time workers to their former employers, where they offer their know-how for substantially less than they had earned before. The ranks of such part-timers climbed 30% last spring, rising from 5 million workers to 6.5 million. The practice is especially prevalent among older workers who have been forced into early retirement but still must work to make ends meet. Overall, analysts expect the number of part-time workers to nearly double in the next few years.

A few large industries have been holding their own on the job front. U.S. automakers have boosted employment from last year's depressed levels as buyers, lured by discounts on attractive new models, have begun returning to showroom floors. Betting that the turnaround will continue, Detroit has planned its busiest third-quarter production schedule in six years. The biggest employment gains have come in health care, which remains a necessity for Americans even as medical costs soar into the stratosphere. In a similar way, people's demands for education and other public services have boosted jobs in state and local governments even though many are running up big deficits to meet voters' needs.

In the long run, the relentless downsizing could pay dividends in the form of a more productive and competitive economy. "We're honing down and becoming more efficient," Norwood says. "In some ways, that is good for us. But it's a painful process. You can't get anywhere without economic expansion, and you can't have growth without creating more jobs. It's a vicious cycle." For the moment, at least, Americans may have little choice but to hope that the pain they endure today will produce some gain tomorrow, or perhaps the day after.

CHART: NOT AVAILABLE

CREDIT: TIME Graphic by Steve Hart

June '91

June '92

CAPTION: Employment in

ELECTRONICS

INDUSTRIAL MACHINERY

CONSTRUCTION

FOOD

AUTO INDUSTRY

RETAIL

INSURANCE

TRANSPORTATION/UTILITIES

STATE AND LOCAL GOVERNMENT

HEALTH SERVICES

With reporting by Dan Cray/Los Angeles, Allan Holmes/Atlanta and William McWhirter/Detroit