New York -- At dinner last week, at a small family restaurant near my home, I asked the owner, "How's business?"
"We were getting by all right until three weeks ago," he replied. "Suddenly, everything stopped."
That coincided with a sharp drop in the consumer confidence index. In October, after edging higher over the summer, the index fell to 70.7 from 78.3, according to the University of Michigan's Institute for Social Research. November plunged to 50.6.
Why this spreading fear? Almost certainly, the lack of jobs. At this point in an economic recovery -- if we are indeed in a recovery -- companies start hiring again. Instead, the layoffs are continuing. New claims for unemployment insurance declined last spring, but since then have been zigzagging back up.
The Conference Board, a business research group in New York City, predicted last week that the unemployment rate, which was 6.8 percent in October, would, on average, remain unchanged for the first six months of 1992. So even if the economy doesn't fall back into recession, it may not grow fast enough to create a lot of new jobs. "Don't look for a strong, active job market until 1993," warns Allen Sinai, chief economist for the Boston Co.
Finance, real estate and other white-collar professions have been especially hard hit in this recession. "Thousands of bankers will never be employed in this industry again," says Irwin Kellner, chief economist for Manufacturers Hanover Trust in New York City.
The unemployed got an early Christmas present when President Bush agreed to extend unemployment insurance for those whose benefits have run out. "Those payments should start arriving at the end of this month," says economist S Jay Levy of the Industry Forecast in Chappaqua, N.Y. "That should improve Christmas sales a little."
More bad news
A puny recovery with few new jobs carries these implications:
* No increase in inflation. If you have a major purchase in mind, wait for it to come on sale; its price won't get away from you. I just bought a 1991 car for $100 more than I paid for the exact same model and options four years ago.
* Even lower wage increases. Wages are rising at a 3 to 4 percent rate (5 percent for managers), compared to around 4 percent last year, Kellner says. Many companies are giving no wage raises at all, just a year-end bonus. To get a higher raise, you'll need a promotion or a job change.
* Puny rises in the average family's standard of living. Couples with a spouse at home can pick up more dollars if the spouse gets a paying job. But the majority of intact families have two breadwinners already. To get extra money, you may have to work more than one job. "The incidence of multiple employment is at a 30-year high," Kellner says.
* Great difficulty in moving to a new city, even for a job. A working spouse may not be able to land employment in the new town. And you may get shockingly low offers on your house. Best advice, if you do move: Take the loss on your house before the monthly payments drain you dry.
* Even lower interest rates. Incomes will decline for people living on their savings. You should keep no more than one year's expenses in money-market accounts. Put the rest into two- to five-year CDs or Treasuries.
By contrast, spendable income will improve for borrowers with variable-rate loans, because your interest payments will decline. you have an older adjustable-rate mortgage that adjusts this year, your interest rate could drop by more than two percentage points. Some lenders are offering new ARMs at first-year rates under 5 percent, to borrowers who can pay two to three points up front (a "point" is one percentage point of the loan).
Best advice for using extra spendable funds: Speed up repayment of consumer debt. Once you're no longer paying all that interest, more of your money will be yours to keep.