10/05/98 IS THE JOBS ENGINE STARTING TO SPUTTER?

Return to main story

IS THE JOBS ENGINE STARTING TO SPUTTER?

Will the strongest U.S. job market in a generation be the next victim of emerging-markets turmoil? Manufacturers that rely heavily on export markets have been feeling the pinch for a year. But now, as the spreading malaise begins to affect bigger chunks of the U.S. economy, deeper job cuts could be in store.
Already, total layoffs in the first eight months were 37% ahead of last year's pAce, according to Challenger, Gray & Christmas Inc., a Chicago outplacement firm. Only 1.9 million jobs were added, compared with 2.2 million for the same period a year ago--a 14% slower growth rate, according to the Bureau of Labor Statistics' survey of company payrolls. And the drop was bigger in service industries, which grew by 920,000 jobs through August, 19% less than in the same period last year, according to the BLS.
ANXIOUS. The slowdown hasn't raised the jobless rate yet, because fewer new workers are joining the labor force. But if job cuts continue at their current pace, today's 4.5% unemployment rate may soon drift higher, economists say. If it does, consumer confidence could take a hit. ''The job market is still good, but workers' anxiety level may jump if the layoffs continue,'' says John A. Challenger, vice-president of Challenger Gray.
Challenger Gray reckons that 359,000 positions were eliminated through August. That's just 11% below the peak in 1993. While factory workers have borne the brunt of these downsizings, also included are employees of such companies as Metropolitan Life Insurance Co., which on Sept. 8 said that it will cut 2,000 of its 27,000 U.S. jobs.
Merger mania is the other force behind rising layoffs. The number of mergers so far this year has jumped by 8% from last year, to 7,999, according to Securities Data Co., a Thomson Corp. unit. Companies are making deep post-merger cuts to reduce costs, says Jack W. Prouty, a partner at KPMG Peak Marwick LLP. And since it can take a year to complete reductions, cuts from announced mergers may further swell the layoff numbers, he says.
Take Citicorp's merger with Travelers Group Inc., which is expected to be completed soon. The two financial companies plan significant reductions to their combined workforce of 160,000--layoffs of up to 5%, say analysts. Part of the calculus is that the company's Asian expansion will be slower. If there's no improvement in Asia--where the combined company had hoped for fresh growth--the numbers could rise.
As these layoffs add up, the employment rate could slip--and there are already some worrisome statistics that are pointing the way. In addition to company payrolls, the BLS also surveys the number of jobs per household every month. The two numbers often diverge, but this year the household measure of jobs has lagged further than usual behind the pAyroll one. Through August, it shows a net gain of just 400,000 jobs, one-fifth the gain in the payroll series. BLS officials say that they can't yet account for the discrepancy. But ''the household survey may be an early warning sign of a job slowdown,'' says Fleet Financial Group Chief Economist Nicholas S. Perna.
True, the labor market is still tighter than it has been in decades. But after years of falling unemployment, the startlingly low jobless rate may soon work its way back to more familiar turf.
By Aaron Bernstein in Washington

Return to main story