Slump strikes services industry The shake-up may continue through the '90s.

January 02, 1992|By New York Times

For decades, banks, fast-food restaurants, hospitals, law firms, retail chains and governments -- the so-called service sector -- have been the engine that powered the great American job machine.

In the 1980s, when services added a stunning 21 million jobs and employed almost four out of five workers, Americans debated whether service jobs were good jobs or bad jobs, but basically took the steady growth of services for granted.

No more. Except for health care, the services are in the throes of a pervasive shake-up very much like the one that racked smokestack manufacturing a decade ago.

The concerted drive to squeeze costs and improve profits has resulted in extensive cost-cutting, job freezes, layoffs, consolidations and takeovers. The storm threatens to last much longer than the recession -- prolonged, very likely, by the wave of white-collar layoffs and the unusual reluctance among service companies to hire.

Indeed, most economists expect the great American job machine, even after it gets going again, to run at just half-speed through much of the 1990s.

The consequences are likely to be felt by many, if not most, Americans for a long time, labor experts say. They expect job growth in the '90s to be the slowest since the 1950s. Pay, including benefits, is expected to rise more sluggishly. Unemployment, now 6.8 percent, is expected to hover above 6 percent for years.

And they predict that job security -- the comfortable expectation of being able to settle down somewhere for life, at least by middle age -- may be gone for good.

Yet economists say that what is a traumatic episode for individuals may prove to be the painful but necessary cure for the nation's top economic problems: woeful productivity growth and stagnating living standards.

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