Jobs disappear even as economy regears Many workers lack new skills needed

February 13, 1993|By Bloomberg Business News

PRINCETON, N.J. -- Even as the economy is said to recover, job cuts keep coming.

International Business Machines Corp., Eastman Kodak Co., Boeing Co., United Air Lines Inc., Northwest Airlines Inc., Fieldcrest Cannon Inc., United Technologies Corp. and Sears, Roebuck & Co. are a few of the more than 30 companies that announced a total of more than 100,000 job cuts since the first of the year.

And just yesterday, Campbell Soup Co. said it was closing two of its plants, including the one in Salisbury, which employs 804 workers.

Some of these reductions come on top of even deeper cuts announcedearlier by the same companies.

Even the federal work force is being reduced, at the direction of President Clinton, seeming to contradict the notion of a strengthening economy. "The hiring in this alleged turnaround hasn't been as strong as in previous recoveries," said Bill Sullivan, a money market economist with Dean Witter Reynolds.

Economic growth is measured not by jobs, however, but by how much is spent by consumers, governments and businesses on products and manufacturing, said Hugh Johnson, an economist

with First Albany Corp. "It's quite possible for the economy to improve while jobs are being lost. That's what's been happening," he said.

Of course, for the thousands of people who have been laid off, improving economic data won't pay the rent.

Unemployment is one characteristic of the type of "recovery" that'soccurring, and it's likely to continue as part of a continuing transformation of the U.S. economy, economists said.

"It's part of a fundamental shift from a labor-intensive economy -- to a technology- or knowledge-driven economy," Mr. Johnson said. Companies are learning to increase productivity with fewer people, a trend likely to lead to higher unemployment. Further compounding the problems is the unpreparedness of the U.S. work force for a high-tech work place, he said.

"About 75 percent of the cost of producing, say, semiconductors today is knowledge: research and development and testing," Mr. Johnson said. "There was a time when 75 percent of the cost of most manufactured goods was for labor or raw materials. That's no longer the case."

It's this shift and an adaptation to global competition that caused the economic troubles of the past couple of years, rather than a recession, some economists said. This so-called recession lacked many hallmarks of previous downturns, such as high inventories, high interest rates and a steep economic slowdown.

"The marketplace in which we have to compete is a much more competitive place," said Bill Griggs, a principal with Griggs Santow, an investment and economic advisory firm. "We don't ** have an insulated marketplace anymore. Years ago, we didn't have to worry about overseas competition. We built poor cars, then foreign countries started making good cars, which forced U.S. car makers to do the same."

To find a parallel to the changes happening today, one has to go back to the turn of the century, Mr. Johnson of First Albany said.

In 1910, the United States had about 6 million agricultural jobs. Today, there are about 2 million agricultural workers feeding nearly three times as many people, he said. The same type of shift is occurring in the economy now.

"The economy today requires fewer people to produce what we made in 1980," Mr. Johnson said.

While the shift began about five years ago, corporate giants with vast bureaucracies often were slow to recognize the changes, and they're trying to catch up quickly by doing their restructuring now, experts said. Companies such as Sears, IBM and Kodak, which dominated their markets for decades, are confronting formidable competition both in the U.S. and abroad and being forced to re-examine the way they do business.

"Corporate giants are usually unable to change direction very nimbly, and we're seeing the consequences of that," said John Challenger, vice president of Challenger, Gray & Christmas Inc. The outplacement company publishes the Challenger Employment Report, which tracks announced layoffs on a monthly basis.

Mr. Johnson agreed. "IBM doesn't need 360,000 workers, but 275,000 workers. They have 30 manufacturing facilities. I'm not sure they need 20," he said.

lTC "It's the same idea with Sears, only a little different. They got passed by Wal-Mart and Kmart because they didn't change fast enough. They just don't need that many workers and that many facilities," he said.

Not all large companies are hurting: Some bit the bullet years ago and are doing fine now, Mr. Sullivan of Dean Reynolds said. Concerns such as Gillette Co. and Colgate-Palmolive Co. that sought to avoid takeover in the 1980s bought back their own stock and had to become leaner and more focused to generate the cash to do so. In addition, many of the companies that were spun off after takeovers were left cash-strapped and had to be efficient and focused to survive. IBM and other giants, too big to have to worry about takeovers, remained complacent, economic analysts said.

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