Tables turn on job scene

Employment skids as recession signs grow more certain

Experts see ripple effect

Consumer fear, less spending could delay rebound until spring

October 14, 2001|By Bill Atkinson and William Patalon III | Bill Atkinson and William Patalon III,SUN STAFF

A year ago, there weren't enough technicians to maintain corporate computer networks, staff the counters at neighborhood fast-food restaurants or assemble telecommunications gear on the factory floor."`Help wanted' signs were everywhere," said Lynn Reaser, chief economist and senior market strategist at Banc of America Capital Management in St. Louis. "The economy was in such a boom phase ... the biggest single problem for most companies was finding people to work."

Today the tables have turned: Companies are cutting workers loose by the thousands, and many economists expect layoffs to multiply as the economy worsens and the pain of the downturn ripples from one industry through the next.

The 1.37 million layoffs announced during the first nine months of the year exceed those in the two previous years combined, said Challenger, Gray & Christmas Inc., a Chicago placement firm that tracks layoffs.

The nation's unemployment rate stood at 4.9 percent last month - up from a 30-year low of 3.9 percent in September of last year. It will likely go higher.

"Nobody is going to be very surprised if we jump up to 6 percent between now and the year-end," said Edward Yardeni, chief investment strategist at Deutsche Banc Alex. Brown in New York. "That may not be the end of it."

Economists who once saw no downturn at all, and then bet on a rebound in the second half of this year, now believe the economy has dropped into a recession. That means deeper payroll cuts, a slashing of expenses and a delay of any economic recovery until spring, experts say.

But, if layoffs are more extensive than economists are projecting, consumers could be spooked enough to cut their spending. The result: The rebound gets pushed even later than most expect.

"That is the ripple effect," said Reaser. As unemployment starts to mount, the implications are more lasting, she said.

The pace of job losses has quickened already. Challenger, Gray said an "extraordinary" 594,326 job cuts were announced in the third quarter alone - more than the annual totals for six of the past 10 years.

"I think the layoffs are going to continue - only the sectors will change," said Phil Dyer, a senior manager at Wealth Management Services in Towson. "The layoffs will move out of technology, information [systems] and the contract manufacturing areas, and will move into the service-sector layer."

In recent months, one-time stalwarts have been hit hard. Cisco Systems Inc., the leading maker of Internet gear, said it would slash 8,500 jobs. Computer seller Gateway Inc. has fired 4,700 employees. General Electric Co. announced plans to trim 4,000 jobs and DuPont Co. said it would cut 4,000. Just recently, retailer Nordstrom, a service-sector mainstay, said it will trim 1,600 jobs.

Maryland businesses hurt

Maryland companies are trimming their work forces as well. Aether Systems Inc., an Owings Mills-based wireless products company, laid off 280 workers in its latest round of cutbacks. Columbia-based Corvis Corp., which makes optical networking equipment, said it would cut 250 jobs, or 15 percent of its work force. And United Container Machinery Inc., a Glen Arm company that makes machines that make corrugated boxes, laid off 56 workers starting in March.

Mitchell McKaughan, a stockroom clerk who made about $38,000 a year, was among those who lost their jobs. McKaughan, who has a wife and two grown children, has been out of work for six months and his unemployment benefits run out this weekend, he said.

Today, "Boom, I run out of money," McKaughan said. "I don't know if I can get an extension on my unemployment. [Landing a job] to make that kind of money is going to be hard."

But he may be one of the lucky ones. United Container has recalled some workers and plans to recall more soon, said George Lang, the company's director of human resources.

McKaughan is hopeful he will be brought back to work. Union officials have told him, "Take out your work shoes and dust them off," he said. But he's heard that before.

The Sept. 11 terrorist attacks only exacerbated the nation's travails, transmitting the job-cut fever to the airlines, travel and hospitality businesses. There are concerns that the job-slashing will sweep through the retail sector if the soon-to-arrive holiday shopping season is a bust. And many economists say the attacks very likely pushed a weak economy into actual recession.

Corporations have clearly accelerated job-reduction plans since that time. Of the quarter of a million job cuts announced in September, 81 percent were ordered after the attacks, Challenger, Gray reported. In Maryland, statewide unemployment claims jumped 21.7 percent in September alone.

Airlines hardest hit

Nationally, airlines were hardest hit, announcing about 100,000 layoffs almost immediately after the attacks.

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