Getting back to work

 In 2010-02

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Getting back to work

A jobless recovery would have consequences for the state’s largest employers — and the entire economy.
By Edward Martin

They moved to Clayton from Indiana two years ago, attracted by, among other things, the region’s strong economy and how the Johnston County town of about 14,000 maintained its village character — a downtown of quaint shops, a drug store established in 1918 — despite growing cul-de-sac developments populated by commuters to Raleigh and Research Triangle Park. But Paula and Richard Schwarze quickly saw changes among their neighbors. “There were quite a few layoffs, and it seems they were long-term, higher-salaried employees — people who had been with companies 20 or 30 years,” she says.

Then her husband lost his management job with a grocery chain. She had worked in real-estate sales and for nonprofits, including a chamber of commerce, in Indiana, so she began looking for part-time work. Last February, she drove to a three-story building just north of downtown Raleigh. The notice had said there would be a job fair — Manpower Temporary Services was recruiting 370 people for a national mortgage company — but what she saw surprised her. More than 1,000 job seekers stood in line that day, clutching their résumés. “We’ve got a pretty good-size building, so we were able to accommodate them,” says Michael Doyle, Manpower regional director. “But we had to call in the police to direct traffic.”

Among the applicants were some of Schwarze’s neighbors. “We’ve seen some who’ve lost jobs become employed again but at lesser salaries,” says Schwarze, 54, who since has signed up for temp work. “Wives have gone back to work because their husbands’ salaries have been cut significantly. People are settling for less than they’ve been making, and some are doing things they don’t want to because that’s all that’s available.” They may be part of the new norm: an ephemeral, on-demand labor market of lower wages and lowered expectations.

Economists say the nation has started rebounding from the recession that began in December 2007, but recovery hasn’t returned the jobs that were lost. North Carolina’s unemployment rate has stubbornly hovered at about 11% for nearly a year. Through November, the state had a net loss of 250,000 jobs since the recession began — a 6% drop. Even those on Business North Carolina’s annual list of the 100 largest private-sector employers have been affected. Six of the top 10 cut jobs in the state during the past year. The three that increased employment were health-care providers, at least in part.

Jobless recoveries aren’t new, says economist John Coleman, a professor at Duke University’s Fuqua School of Business. The two previous recessions, starting in 1990 and 2001, were like that, with hiring not resuming in earnest until about 18 months after the gross domestic product began rebounding. “That indicates that by no means is what we’re experiencing now a permanent rise in the unemployment rate.”

But that also doesn’t preclude dramatic changes for the state’s more than 4 million workers. Turnover is likely to be higher, because of increased use of contract employees and temps. Benefits, now not so necessary to attract the best, are shrinking like cheap jeans. Per-unit labor cost is likely to go down as automation and technology — grocery stores’ computerized self-service checkouts linked to automated inventory management are one example — reduce demand for workers. North Carolina might already be seeing the results.

After Dell Inc. announced in October that it would shut down its computer-assembly plant in Forsyth County, idling 905 employees, Ben Barnwell, manager of the Employment Security Commission office in adjoining Guilford County, began grappling with the fallout: Former textile and furniture workers, who four years earlier had thought tech was their ticket to a bright future, realized those jobs might be more transitory than their old ones and began signing up for retraining. Though Dell declines to discuss its Triad operation, officials at its Round Rock, Texas, headquarters confirm that the company has a strategy to cut costs by replacing permanent employees with temporary workers.

Barnwell says the state’s limit of 26 weeks of unemployment insurance once sufficed in slumps. Employment gradually would bottom out and pick up again. Few expect to see that in the current recovery — Dell blamed weak demand for computers but also shifted some production overseas — and the results could be unsettling for workers. “It’s a buyers’ market for labor now,” says Barnwell, a 30-year ESC veteran. “Employers don’t have to pay as much because so many people are looking for jobs.”

Employers who have had to make do with fewer full-time, permanent workers may be getting comfortable with smaller staffs. “Though at many companies conditions are more stable than they were a year ago, there’s not anything out there right now to suggest they’re going to start ramping up employment by much,” says John Quinterno, a principal in South by North Strategies Ltd., a Chapel Hill research consultancy. “At the same time, they’ve got a lot more flexibility — contract hiring, part-time employment, temps — and a lot of firms that haven’t necessarily let people go have cut back on hours, so they have a lot more internal flexibility.” Many are like Schwarze’s neighbors in Clayton. “They’re working a lot less than 40-hour weeks,” she says.

The immediate effect can be found in Manpower’s Raleigh office. “Flexibility is what we do,” Doyle says. “We use the term ‘plug and play.’ We have a lot of companies that want to plug in the talent, get something done, then take the cost out.” But in the longer view, the new labor norm — the amenable, short-term, jack-of-all-trades worker — could have broader implications.

Coleman says technology advances might hurt narrow segments of the labor force — automation was as much to blame for the decline of the Tar Heel textile industry as loss of jobs to foreign producers — but not the broader labor market. “When a firm has a more productive workforce, thereby generating more profit, as long as it can expand production without leading to a drop in prices for its goods and services, it’s profitable for the firm to do so. If the entire economy is more productive, the demand for workers is going to rise.”

Demand for workers, however, depends on rising demand for the products and services they provide. Quinterno says that’s why the new norm could have a dark side — one that might make future recoveries even longer. “There are a variety of consequences for employees. It injects a lot more uncertainty into their lives — and financial instability. Income swings more wildly. If the spouse has to go to work, there’s the compound issue of child care. Even in a relatively skilled field now, you don’t have much employment or financial security, so that can put a strain on the economy and growth in demand.”

Fear becomes a factor. “If people are afraid, they’re not going to eat out once a week or go to the movies or write that check to the United Way,” Quinterno says. “It ripples out to the larger economy. If you’re talking about jobless recovery, firms are going to want to add labor when they have the opportunity to sell more goods and services, but they can’t if there’s not much demand for them.”

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