Rising economy draws skepticism Greater output not followed by hiring, executives find.

October 21, 1991|By New York Times

The nation's manufacturers say that while production has risen in recent weeks for many products, the pickup is so modest and uncertain that hiring new workers -- an essential step if the nation is to shake off the recession -- might be delayed indefinitely.

In interviews with more than 20 executives at the semiannual directors meeting of the National Association of Manufacturers, which ended in Atlanta on Saturday, the story was essentially the same: Production for home consumption, apart from exports, is 1 percent to 3 percent above last summer's levels. Those numbers suggest the recovery is finally at hand, but the executives held back from making that pronouncement.

Instead, they greeted the improvement with skepticism and with doubt that it would last. "You have to look pretty hard to find it," said Harry A. Hammerly, an executive vice president at the Minnesota Mining and Manufacturing Co., the tape maker.

The Procter & Gamble Co., for example, finds that sales are up 2 percent or more since June for all its numerous consumer products: foods, beverages, soaps, paper items and beauty aids. But Marvin Womack, a Procter vice president, said the company did not know yet whether Americans were consuming more, or Procter was simply taking sales away from competitors, with no net national gain.

"You need the disposable income and the will to spend it to increase national consumption," he said. "Neither seems present."

Similarly, the Phelps Dodge Corp., the copper company, has experienced what Douglas C. Yearley, the chairman, described as a surge in orders over the last four months for wire used in autos, electric motors and home construction. "That's surprising, since we don't see the end demand," Yearley said, adding that much of the wire might have been earmarked for the 1992 model cars.

"Now we are getting signals from the auto companies' purchasing people that if they don't get better car sales, they won't maintain the order level," he said.

Reflecting a view apparently widely held among the 150 executives at the two-day meeting, those interviewed said a gradual rise in production means that companies are not forced to hire workers or even to pay much additional overtime. A surge in demand and in production -- the pattern in the early months of previous recoveries -- would force companies to expand their work forces quickly.

But slowly growing sales leave time to increase production through labor-saving strategies: more automation and rearranging work assignments.

"If the business comes back slowly, as ours is now, we can phase in these productivity improvements, which take time," said Wallace Barnes, chairman of the Barnes Group Inc. in Bristol, Conn., a maker of metal springs and precision parts. "That is not good news for the nation's employment statistics, but it is good news for our competitiveness."

The resistance to rehiring -- indeed, the Barnes Group, which employs 5,000 people in the United States, is still reducing its fTC staff through attrition -- runs counter to the dynamics for a recovery that have been outlined by the Bush administration, the Federal Reserve and many economists. Even in a weak recovery and a slow improvement in factory production, they had expected that overtime and new hiring would soon kick in.

The resulting rise in income, in turn, would fuel more demand, more purchases, greater production and more hiring, making the recovery a solid reality by year-end.

But manufacturing employment has risen by only 67,000 workers, to 18.4 million, since the recession's low point earlier this year, and remains well below its 19.2 million level when the recession started.

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