But the Market Rises


August 24, 1993|By ROBERT RENO

Even as the Dow Jones industrial average rose to a record high last week, the roof continued to fall in for thousands of American employees.

Eastman Kodak announced it would eliminate 10,000 jobs. Coopers & Lybrand will get rid of 160 partners. AT&T will abolish the jobs of 4,000 telephone operators. Ameritech will say goodbye to 1,500 employees. Reynolds Metals will cut its capacity by 97,000 tons and its work force by 1 percent. Air Products and Chemicals will eliminate up to 1,400 workers. General Electric's aircraft-engine unit will dismiss 4,000 people, mostly in salaried positions. This comes on top of 6,250 firings announced earlier.

Other recent cutbacks include 3,000 jobs at Johnson & Johnson, mirroring similar big reductions at two other pharmaceutical giants, Merck and Bristol-Myers Squibb. Procter & Gamble is shedding 13,000 employees. And the Lord only knows how many fewer IBM employees there'll be when that company, once one of the most dependable employers in the nation, gets finished butchering its work force. The 35,000 dismissals it has announced may or may not be the end of it.

A survey of 2,054 companies published last week by Wyatt Co. found that 29 percent of them plan layoffs this year, that 25 percent of them plan to hire temporary workers instead of new permanent employees and that many of them are increasing work hours of existing employees instead of hiring new people.

The Labor Department's survey of major collective bargaining agreements reflects the critical uncertainty facing American manufacturing workers. In the second quarter, unionized workers were able to wring wage increases averaging only 1.5 percent from their employers.

There is certainly no mystery to why, even as the stock market moved comfortably upward, the Conference Board's latest index consumer confidence fell for the third straight month. It's now 26 percent below its December level. Of those surveyed, 27 percent expected that there will be fewer jobs available in the months ahead. That's the highest level of job pessimism in 16 months.

American workers are scared. Give them the lowest mortgage rates in 20 years and what happens? Housing starts declined in June and July.

So why is the stock market doing handstands? It's simple. You can't make a decent return earning interest so many investors have gone there in desperation seeking higher yields.

But also, an awful lot of investors are betting that these downsized companies are going to emerge leaner, meaner and more profitable. Besides, while thousands of workers were getting the sack, the economy has added 1 million new jobs since the start of the year.

Of course, most of them can't match the earning power of the jobs that have been lost. The blue chip manufacturers that have been laying off most aggressively include some of the highest-paying companies in America, places like IBM and Procter & Gamble, where employment had previously been considered a ticket to lifetime security, good benefits and payroll security.

You don't throw away these kinds of jobs and not expect to do fundamental damage to the economy, no matter how impressed Wall Street is with your improved balance sheet.

Robert Reno is a columnist for Newsday.

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