[OPE] the lean and mean economy

glevy@pratt.edu

March 2, 2008 
Is a Lean Economy Turning Mean? 
By PETER S.
GOODMAN 
OAKLAND, Calif. - NICOLE FLENNAUGH has a college degree,
office experience and the modest expectation that, somewhere in this city
on the eastern lip of San Francisco Bay, someone will want to hire her.

But Ms. Flennaugh, 36, a widow, cannot secure steady,
decent-paying work to support herself and her two daughters. Nearly two
years after she was laid off as a customer service representative at the
Educational Testing Service, and even after applying for dozens of
full-time jobs, she has been getting by with occasional stints as an
office temp. 

"You're used to making $17 an hour with
benefits, and now you have to take any job for $8 an hour," Ms.
Flennaugh says. On a recent afternoon, she sat in front of a computer
terminal at an employment center in a gritty part of town, scrolling
dejectedly through online job listings while sending another batch of
applications into the ether. 

"I've literally sat and
cried, but my friends with double degrees are doing worse," she says.
"It's the economy. It's really bad." 

Now, it's
getting tougher - particularly for those at the lower rungs of the
economic ladder, and especially for African-Americans like Ms. Flennaugh.
As the economy slows and perhaps slides deeper into a recession that may
already be under way, communities like this - cities that have long
struggled with a shortage of jobs - see work becoming scarcer still. 

Across the nation, the labor market has been deteriorating. Many
companies, long reluctant to add workers, are hunkered down and waiting
for improved prospects, engaged in what Ed McKelvey, a senior economist at
Goldman Sachs, calls "a hiring strike." Americans with jobs are
taking cuts to their work hours; those without jobs are staying out of
work longer, or accepting positions that pay far less than they earned
previously. 

Teenagers are struggling to land minimum-wage jobs
at fast-food restaurants, because those positions are increasingly being
filled by adults. And those with poor credit are finding that this can
disqualify them from getting a job. 

IN many communities,
dreams of upward mobility are yielding to despair and the grim realization
that the economy - not strong for less-educated workers even when it was
growing - may now be shrinking, making it tougher than ever to find a job.

Indeed, the increasingly anemic job market comes on the heels
of six years of economic expansion that delivered robust corporate profits
but scant job growth. The last recession, in 2001, was followed by a
so-called jobless recovery. As the economy resumed growing, payrolls
continued to shrink. 

Even as job growth accelerated in 2005
and 2006 before slowing last year, it was not enough to return the country
to its previous level. Some 62.8 percent of all Americans age 16 and older
were employed at the end of last year, down from the peak of 64.6 percent
in early 2000, according to the Labor Department. 

"The
economy never got its groove back after the tech bubble burst," says
Mark Zandi, chief economist at Moody's Economy.com. "We're still
feeling fallout from the collapse of the tech economy and the accounting
scandals. There are still psychological scars for the managers affected.
Managers are less interested in taking risks." 

In many
metropolitan areas, overall employment remains below levels reached before
the last recession; the list includes New York, Chicago, Detroit,
Milwaukee and Buffalo, as well as Boulder, Colo.; Spartanburg, S.C.; and
Topeka, Kan., according to Economy.com. 

As the presidential
contenders Hillary Rodham Clinton and Barack Obama crisscross Ohio ahead
of its Democratic primary on Tuesday, they are stopping in many cities on
that list - Canton, Cleveland, Dayton, Toledo. They are focusing on
bread-and-butter economic issues, promising to increase the minimum wage,
extend unemployment benefits and generate new jobs. 

Oakland,
long known as the blue-collar sibling to the aristocratic San Francisco
across the bay, is among the metropolitan areas that never fully recovered
from the last recession, with fewer jobs today than in March 2001,
according to Economy.com. The technology boom of the 1990s and the real
estate bonanza of more recent years created fewer jobs and less wealth
here than they did in the moneyed enclaves like Silicon Valley. Yet if
Oakland missed out on the festivities, it is already feeling the pullback.

"There's more competition for every job," said Gay
Plair Cobb, chief executive of the Oakland Private Industry Council, a job
training organization. "People are getting discouraged and
depressed." 

Home to about 400,000 people, Oakland is
enormously diverse, with blacks making up 36 percent of the population,
Hispanics 22 percent and Asian-Americans 15 percent, according to the 2000
census. The city is racked by stubborn poverty, with one-fifth of all
households living on less than $15,000 in annual income, according to the
census. 

Given that picture, Oakland reflects a national trend:
The weaker labor market is especially pronounced for African-Americans,
and black women in particular, a slide that has halted a quarter-century
of steady gains. 

>From 1975 to early 2000, the percentage
of African-American women who were employed jumped to 59 percent from 42
percent. Two years later, following a recession, the percentage had
dropped to 55 percent. Since then, employment among African-American women
has shown little change, reaching 55.7 percent at the end of 2007. 

In a recent paper, the Center for Economic and Policy Research
asserted that a recession in 2008 would be likely to swell the ranks of
the unemployed by 3.2 million to 5.8 million, while raising the
unemployment rate among black Americans to 11.3 percent to 15.5 percent,
compared with 8.3 percent in 2007. 

Nationally, the
unemployment rate remains at a historically low level of 4.9 percent,
though this does not include people who have given up looking for work.

The slide in employment is occurring at a time when jobs are
more important than ever for millions of households headed by
African-American women, because welfare changes in the 1990s forced many
into the job market to compensate for a loss of public assistance. 

"The labor market for low-income women is so poor that it's
almost a hoax," says Randy Albelda, an economist at the University of
Massachusetts in Boston. 

For more than a decade, Dorothy
Thomas, 49, an African-American and a mother of two, worked as an
administrative assistant at various health care centers in Northern
California. In her last job, she earned $16 an hour, as well as benefits,
she said. 

It was never enough to pay all the bills, she said,
so she made choices, paying this one, not paying that one, all the while
focused on one mission: getting her two daughters through school. She
lived in apartments in better neighborhoods, paying more rent than she
could afford to ensure that her girls attended better schools. 

"I truly bought into the idea that education is the way out of
poverty," Ms. Thomas says. One daughter received a master's degree in
education and is a teacher in Hawaii, she says, and the other is still in
college. 

But the bills for Ms. Thomas are still coming due.
She lost her car in November 2005 after she fell behind on the payments.
Unable to drive to work, she lost her job. Since then, she has been unable
to find a job. 

Several times, she has landed interviews that
seemed likely to bring offers, but the jobs required a credit check - a
test she cannot pass. 

"My credit is just so in
shambles," she told a classroom full of people gathered for a credit
counseling session at the Private Industry Council. "More and more
jobs are checking your credit. They're saying that credit is a reflection
of your character." 

Ms. Thomas deftly toggles between
different modes of speech, from street-smart to receptionist-smooth. But
getting to work without transportation and buying clothes for interviews
without cash are beyond her abilities. 

"Why can't I get a
job?" she asks, her eyes welling with tears. "Is it because of
my age? Is it because I've gained weight? I'm articulate. I'm a positive
thinker. I know how to conduct myself in an office setting. But I'm
starting to lose all my confidence." 

Government data show
that the labor market has weakened in recent years for nearly every
demographic group. Women as well as men; whites, blacks, Hispanics and
Asian-Americans; teenagers and the middle-aged; high school graduates and
those with college degrees. In terms of employment as a percentage of
population, all remain below the level reached before the last recession.

The source of this weakening and what it says about the
overall, long-term health of the economy are the subject of fractious
debate. 

Some economists argue that the labor market has merely
settled back to earth after years of ridiculously aggressive investment in
technology, which created far more jobs in the 1990s than could be
sustained. 

"This is a return to normal," says Robert
E. Hall, an economist and senior fellow at the Hoover Institution, a
conservative research group at Stanford. 

But others conclude
that the sluggish job market reflects long-term, systemic forces reshaping
the American economy. It represents, they say, the underbelly of the
so-called new moderation that has made recessions less frequent and less
severe. 

Traditionally, the American economy has often expanded
in extreme cycles. In periods of growth, companies hire aggressively. When
they sense a slowdown, they cut back, laying off workers and curtailing
investments, amplifying the ripples of retrenchment. Now, however,
companies aim to keep their work forces lean all the time. 

AS
the American economy boomed in the late 1990s, so did business for the
Bartlett Manufacturing Company, a circuit-board maker based in Cary, Ill.
By 2000, it had about 200 workers - mostly in blue-collar assembly jobs at
its original factory near Chicago, and an additional 50 or so at a new
plant in Albuquerque, said the company's chairman, Douglas S. Bartlett.
Most of the positions paid $10 to $11 an hour. 

But by late
2001, with the country in recession and many orders flowing to China,
business was down two-thirds from the best years. So the company shuttered
its Albuquerque factory and laid off more than 100 workers at its Chicago
plant, bringing its total work force down to 87. 

Business
improved slightly in 2004 and 2005 and remained essentially flat over the
last two years, but the company hasn't added workers. 

"We
improved our process through automation," Mr. Bartlett says. 

If business now deteriorates, he does not expect to shed workers,
because he is already down to the minimum needed to keep his plant
running. 

"When a customer calls, you need to be able to
deliver parts in three or four days because, if they could wait longer,
they would just go offshore and get it cheaper," Mr. Bartlett says.
"We don't lay people off at this point. We just reduce hours. We
pretty much can't get any leaner." 

Bartlett
Manufacturing's experience is emblematic of forces at work throughout the
economy. An anemic job market is not so much a product of layoffs - which
remain relatively few - as it is a result of a sharp pullback in hiring.

In 1994, 30 million people were hired into new and existing
private-sector jobs, according to the Labor Department. By 2000, the
number of hires had expanded to 34 million. A year later, in the midst of
the recession, hiring slackened to 31.6 million, while layoffs winnowed
the work force. 

In 2003, with the economy again growing,
layoffs slowed, but the private sector hired only 29.8 million - a figure
that has nudged up only a little in the years since. 

Rather
than hire and risk having to fire in another downturn, companies added
hours for those already on the payroll and relied more on temporary
workers, said Mr. McKelvey, the Goldman Sachs economist. Manufacturing
companies continued to automate, to squeeze more production out of the
same number of workers, while shifting jobs to lower-cost countries like
China and Mexico. For lower-skilled workers, that intensifies the
competition for the jobs that remain. 

"Now, you're not
only competing against the guy next door," Mr. McKelvey says.
"You're competing against the guy across the water." 

Some economists say the weakness of hiring in recent years may protect
those with jobs against the usual impact of a recession: Many companies
are so lean that the unemployment rate may not increase much. 

"It's not your grandfather's recession anymore," says Jared
Bernstein, senior economist at the Economic Policy Institute, a
labor-oriented research group in Washington. "You're probably going
to see fewer layoffs, because you just don't have the traditional
model." 

But the same trend suggests that the impacts of
the slowdown are likely to be felt deeply for several years, even after
the economy resumes a swift expansion, Mr. Bernstein added. 

Before 1990, it took an average of 21 months for the economy to add back
the jobs shed during a recession, according to an analysis by the Economic
Policy Institute and the National Employment Law Project, a worker
advocacy group. Yet in the last two recessions, in 1990 and 2001, it took
31 months and 46 months, respectively, for employment levels to recover
fully. 

In the recessions of the early 1980s and the early
1990s, the ranks of the so-called long-term unemployed - those out of work
for 27 weeks or more - jumped to well above 20 percent of all unemployed
people. But in both cases, that share eventually settled back to close to
10 percent of the unemployed. 

After the 2001 recession,
however, the long-term share stayed above 20 percent from the fall of 2002
until the spring of 2005. In the months since, it has never dipped below
16 percent. In January, 18 percent of those unemployed had been without
work for at least 27 weeks, according to the Labor Department. 

OAKLAND is typical of the lean hiring that has accompanied the winnowing
of jobs. In recent decades, Oakland's once-formidable manufacturing base
has hollowed out as the city has lost food processing factories, auto
plants and warehouses. Downtown, concrete-floor factories have been turned
into chic residential loft spaces. 

Yet the Port of Oakland is
booming, with dozens of cranes arrayed at the bay's edge, plucking
containers full of cars and electronic products off of ships arriving from
Asia, and depositing shipments of produce from the Central Valley of
California. 

The port has benefited from a surge in American
exports. Port officials cite an economic development study showing that
jobs connected in some way to their operations - in industries ranging
from cargo and trucking to insurance and retail - doubled to more than
28,000 from 2001 to 2005. A planned $800 million expansion would add 7,000
more jobs, said James Kwon, director of the port's maritime division. 

Deborah Acosta, international trade project manager of the
Community and Economic Development Agency of Oakland, says, "We're
talking about good-paying jobs that don't require a college degree."

So far, the growth at the port has not been enough to
compensate for steady erosion of work elsewhere in the city. Since 2001,
the metropolitan area has shed 22,000 manufacturing jobs, and thousands
more in transportation and warehousing, and professional and business
services, according to Economy.com. 

For public officials
grappling with the social and political impact of long-term joblessness,
training has become a mantra. 

"The jobs are there, but
the people to fill the jobs are not," says John Garamendi, the
lieutenant governor of California. "The current demand for skilled
individuals in medical fields, in biotech, for people capable of welding -
there's a demand for these people." 

But all too often,
these job-training programs fail to find people the jobs they expect, said
Marsha Murrington, vice president for programs at the Unity Council, a
nonprofit social service organization that operates a job center in
Oakland. 

"People are getting training or high degrees in
areas that are not supported by the job market," she complains.
"People are looking for those high-paying corporate jobs that aren't
there." 

Greg Bailey, another Oakland resident, is among
those who banked on the benefits of job training. Last spring, after 15
years as a truck driver, an installer of household appliances and a
warehouse stocker - jobs that left him nursing a bad back and high blood
pressure - Mr. Bailey decided to pursue work that was less physically
taxing. He enrolled in a government-financed training program to gain the
skills needed to work at one of the many biotechnology plants sprouting up
in the area. 

"It sounded great; the opportunities were
almost endless," said Mr. Bailey, 40, tall, soft-spoken and
personable. 

A former high school basketball star, Mr. Bailey
said he had to turn down several college scholarships when he graduated so
he could find a job and support his mother, who was ill, along with his
younger brother. Later, he enrolled several times in various college
programs, but the demands of being the family's primary breadwinner left
too few hours for schoolwork. 

The biotech training program was
to be a way to jump ahead, putting him in position to earn $17 to $18 an
hour, as well as health benefits, as a warehouse or maintenance worker in
an industry that offered other chances for advancement. But despite
applying for about 100 jobs over the last six months, he says, he has
never been invited to an interview. 

Last summer, a month after
the course ended, he went to a job center in East Oakland and was
surprised to bump into six of his classmates. 

"I was
like, 'Oh man, you're all here too?' " Mr. Bailey said. "We all
started looking at anything at that point. It was kind of
depressing." 

RECENTLY, he began applying for the same
types of jobs from which he had hoped to escape. Now, even those jobs seem
beyond reach. He did take one warehouse job that started at 5 a.m. and
required him to walk two miles to and from work, but he quit in disgust
after two weeks. It paid $10 an hour - two-thirds of what he used to make
as a truck driver. 

He applied for a minimum-wage job at
Wal-Mart, but after two interviews the person doing the hiring was fired,
he said, and Mr. Bailey was told that he had to start all over - this for
a night shift at a store in an area plagued by crime. Disenchanted, he
stopped pursuing a career at Wal-Mart. 

"I'll just look
for anything now; it doesn't matter," he confided on a recent
afternoon. 

The next day, he accepted a job at a warehouse for
$9 an hour. 

"It's just picking up boxes," he says.
"That's all right. I've got to do something." 

Copyright 2008 The New York Times Company 

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