PHILADELPHIA - Americans worried about their jobs and economic prospects are raiding their piggybanks and spare-change drawers - to the tune of billions of coins.
The U.S. Mint, which produces all the coins in circulation, says that with the economic downturn the nation will consume vastly fewer new coins. It has begun laying off 357 workers in Philadelphia, San Francisco, Denver and other places to curtail coin production and protect its profits for the U.S. Treasury.
The Mint believed as recently as this summer that the nation would need 23 billion new pennies, nickels, dimes and quarters in 2002. But the Mint bean counters reduced that number to 15 billion when it became apparent the economy would not rebound quickly after the Sept. 11 terrorist attacks.
"This all happened fairly rapidly," Mint spokeswoman Susan Valaskovic said. "Now you understand why we're reducing employees in Philadelphia."
The decline in demand for coins from the U.S. Mint is "staggering" and reflects both the slumping national economy and other factors in the coin realm, said James Benfield, executive director of the Coin Coalition in Washington, D.C., a lobbying group that supports the dollar coin.
The U.S. Mint has produced too many coins in the past year and now is coping with tens of millions of dollars in unexpected coins flowing into the economy as people scrounge through drawers, old suits, jars and cans for stockpiles of used coins.
"As the economy slows down, this stuff comes out of the closet," Benfield said. "When you're out of a job, you cash in all your coins."
Valaskovic said a slower economy has led to fewer cash transactions at department stores and other retailers nationwide, and that has hurt new coin demand from the U.S. Mint stamping presses.
"If a store in King of Prussia [Pa.] is ordering fewer coins from its local bank, and that local bank is placing fewer orders for coins with the Federal Reserve ... the Federal Reserve is ordering fewer coins from us," she said.
Layoffs and other cutbacks are necessary to preserve the Mint's profits, which are the difference between the cost to manufacture a coin and its sale price to the Federal Reserve Bank. The Fed controls the amount of money in the nation's financial system.
For instance, the U.S. Mint manufactures a quarter for 4.5 cents, but it charges the Federal Reserve the full 25 cents. The 20.5-cent profit is funneled into the United States Treasury to help run the federal government.
With demand low, the Mint is like any private manufacturer and has to cut its overhead costs.