An Unemployment Wallop

As the recession hits, the long gray jobless lines begin to form

From the moment economists first began warning six months ago that the Administration's inflation-fighting tactic of pushing up interest rates would bring on a recession, Jimmy Carter has been countering with calm assurances that any downturn would be "mild and brief." All winter long it seemed as if he might be right. Unemployment, a major indication of economic health, hovered steadily at an unsatisfactory but acceptable 6% of the labor force.

By last week it looked as if the President's promises of a tame little downturn for 1980 were wishful thinking. The Labor Department reported that during April the nation's jobless rate ballooned by a startling .8%, pushing unemployment to a full 7%, tossing some 825,000 workers into the street, and swelling the ranks of the nation's unemployed to 7.3 million. It was the largest rise in overall unemployment since January 1975 and the biggest climb in the jobless rate among males since 1949. Their unemployment rate leaped a full 1% during the month, to 5.9% of the labor force. The highest adult unemployment rate of all, 11.4%, was registered by nonwhite females.

The jobless surge shows that the Administration's painful, but unavoidable, policy is at last beginning to take hold. Supporting evidence that the economic downturn could be a lot sharper than previously expected came from the Commerce Department. It reported that its index of leading economic indicators, which predicts future economic movements, plunged 2.6% in March. That was the largest one-month drop since the 1974-75 recession. Anti-Inflation Adviser Alfred Kahn, with his characteristic candor, said last week: "The country now faces the dilemma we have so long feared, the twin ugly evils of accelerating inflation and the long-predicted recession."

Though the figures made gloomy reading, President Carter pressed ahead with his Pollyannaish forecast, telling accounting firm executives that recently lowered interest rates and a hoped-for drop in inflation by this summer mean that the nation has "turned the corner" on the economy. In fact, it looks as if U.S. business has turned the corner and come face-to-face with an unexpected precipice.

Businessmen and economists are now beginning to wonder about how deep the plunge could be. During the nation's last recession, the worst such drop since the 1930s, unemployment rose from 4.8% in November 1973 to 9% in May 1975. Experts are concerned because the U.S. is entering the current recession with a much higher number of unemployed. Also trou bling is the rising so-called full employment level. Until a decade ago, Washington officials considered 4% unemployment to be in effect full employment. Any attempt to push the jobless rate below that would only result in higher inflation. Today many specialists believe that such a rate is much steeper. Says Stanford Economist Robert Hall: "For the foreseeable future, we may have to adjust to a full employment or sustainable unemployment rate of between 6.5% and 7%." That would mean an additional 2 million to 3 million Americans without work.

All across the country, from the aging industrial centers of the Northeast to the suburban sprawl of the Southwest, pink unemployment notification slips are beginning to turn up in pay envelopes. When blue-collar employees get the news, employers normally say that those being laid off are made "redundant." But when announcements of wholesale dismissals of excutives are made, the gentler euphemism of "furloughing" is usually used.

Whatever the term, many jobless workers will feel little immediate financial hardship. Generally, anyone who has been employed between 14 and 20 weeks during four of the last five quarters can draw unemployment compensation that averages about 50% of gross weekly wages. Large unions now have also obtained from employers regular layoff benefits for their members. In addition, workers such as those in the steel, auto and shoemaking industries can count on receiving substantial supplemental payments under a 1962 federal program that grants special aid to employees whose companies suffer from foreign competition. In fact, some steelworkers can be laid off and actually collect total benefits exceeding $360 per week, or more than their previous base take-home pay.

Other workers are not so lucky. For self-employed carpenters, roofers and homebuilding contractors, who often do not even qualify for state unemployment benefits, the loss of work can mean immediate and stunning financial pain. Yet for everyone, from furloughed vice presidents to laid-off warehouse clerks, the lack of a job in a culture that virtually assigns a person his identity by the work he does can be an insidious, soul-destroying experience. Says an unemployed mechanic, Jim Burton of Baltimore: "You lose a week's pay and you die a little."

Some skilled employees seem practically recession-proof. California's booming aerospace and microelectronics industries are surfeited with back orders that are expected to keep production lines humming for months.

On the other hand, people employed in either homebuilding or automaking, two of the nation's largest industries, are already reeling. In Detroit, where unemployment now stands at over 15% and automakers' sales are running 16.6% below 1979 levels, factory workers and executives are both getting the ax. Chrysler has already laid off over half its factory work force, and is now cutting its white-collar staff to 65% of last year's levels. The number of total employees last week had shrunk from 130,700 a year ago to 89,900. Ford expects to let over 10,000 of its 67,000 U.S. technical, administrative and sales people go by summer, and GM is saying goodbye to some 18,000 front-office staff.

Unlike blue-collar workers, who know that when the economy perks up the companies will usually call them back, executives have no such assurance. Says the Dearborn, Mich., executive recruiter William Tripp, who has been swamped with applications from furloughed automen: "These layoffs look a lot more permanent than in 1974. The industry is really retrenching, and a lot of people just are not going to be asked back."

For Ford Test Engineer Bob Mogridge, 35, who was let go last week, the pain of unemployment is multiplied by the aggravation of homeownership. With engineers already flooding the local market, Mogridge would eagerly move to another city if he could afford it. In Detroit's depressed real estate market, however, his four-bedroom house is all but impossible to sell at a price that could provide him with equivalent housing elsewhere. "The house is like a ball and chain around my foot," complains Mogridge.

With home sales in a near free fall nationwide, new construction is ,also suffering. This in turn is sending unemployment ripples throughout the labor-intensive building materials and supply industries. In the logging country of the West, 211 of the region's 820 timber mills have closed altogether, and 266 have curtailed production. This has put 38,000 of the industry's 137,000 workers on short time and an additional 23,000 on layoff.

Though the Administration continues to hope that overall unemployment will rise no higher than about 7.2% by year's end, a steeper climb seems inevitable. Alan Greenspan, a Republican economic consultant, foresees the jobless rate rising to about 8% this year and climbing to 8.2% by early next spring. Democratic Economist Robert Nathan anticipates that unemployment will peak early next year at 8.5% or higher.

As Election Day draws closer, there will be a strong temptation for both Carter and Congress to rush to stimulate the economy either through a new burst of federal spending or a quick tax cut. The Administration will also face problems coming up with the balanced budget that Carter has promised for fiscal year 1981, which begins in October. Last week, for instance, the White House decided to ask Congress for a supplemental unemployment appropriation of $1.5 billion to cover increased outlays for workers idled by the downturn. Further such requests are quite possible in the months ahead.

It would be costly and dangerous for the Government to become an uncle with a job for everyone. Says one Administration economist: "We calculate that to employ a single person in a public-works job, such as building a school, a road or a bridge, costs about $69,320 per year in taxpayer money."

Moreover, such programs are almost always started too late to have any immediate impact on unemployment. It takes at least a year for federal works projects to put people on the job. By that time the recession is usually already over. The major impact of the federal spending is to feed inflation later.

Rising unemployment is a painful and costly consequence of any effective attack on inflation. But 15 years of stop-go economic policy, in which the U.S. first fought inflation and then unemployment, have resulted only in more of both. Indeed, in 1965 unemployment was 4.5% and inflation 2%, yet today those figures stand at 7% and 18%. The only long-term solution to the nation's economic ills is a steadfast, although bitter, battle against high prices.

This file is automatically generated by a robot program, so viewer discretion is required.