Unemployment On The Rise

By James Kelly

Fewer benefits mean harder times for the jobless

It is one of the most watched, and most politically potent, of the monthly economic figures issued by Washington, and it keeps creeping upward. The unemployment rate in the U.S. last December reached 8.9%, in contrast to 8.4% the previous month and 8% in October. In human terms, the number meant that 9.5 million American workers had no jobs in December. This week the Bureau of Labor Statistics will announce the unemployment rate for January and it will almost certainly be up again, perhaps surpassing the previous postwar record of 9% reached in May 1975.

The growing jobless rate comes at a crucial time for the nation, since the Reagan Administration's economic program of budget and tax cuts is only now beginning to take effect. As the President pointed out in his State of the Union message, a 1% jump in the unemployment rate raises the federal deficit by $25 billion because of lost taxes and additional unemployment benefits. For the first time in years, polls show that more Americans are worried about unemployment than inflation. The jobless rate, if it keeps climbing, could well become the primary focus of the political debate right up to the November elections. At stake are not just Republican fortunes in the House and Senate, but Reagan's effectiveness as President in wooing Congress to do his bidding. Says one White House official: "You don't lose elections because of inflation. You do lose elections because of high unemployment. If unemployment breaks 10%, we're in big trouble. And if it's not down to 8.5% by the election, it's going to have serious consequences."

It is doubly troublesome that the ranks of the jobless are growing at a time when many of the cushions softening the pain of unemployment have been deflated. Reaganomics has whittled away at unemployment compensation and has tightened eligibility rules. At the height of the 1973-75 recession, for example, more than 75% of the 8.4 million jobless Americans received benefits; last December only 37% of those out of work got unemployment compensation. By eliminating 300,000 public service jobs provided by the Comprehensive Employment and Training Act (GETA), the Reagan Administration shut off a source of work that has been both praised as a safety net for minorities and damned as a boondoggle. Finally, there have been major cuts in public employment services, which placed 3.7 million people in jobs last year, including 583,000 who had been drawing unemployment benefits.

Traditionally, Congress has tried to bring down unemployment with public works projects and public service jobs. But those familiar panaceas have been largely discredited, and even many Democrats are skeptical that old methods should be tried again. Says Massachusetts Senator Paul Tsongas: "We've been down that road before. It doesn't produce anything." The legislation being offered now to fight unemployment would stress job training for the private sector, not creating public jobs. Democrat Ted Kennedy, who last week called unemployment "the No. 1 issue now nationwide," has joined forces in the Senate with Republican Dan Quayle of Indiana to sponsor a $4 billion job-training program. In the House, California Democrat Gus Hawkins has proposed a $5 billion training program that would allow local officials to use some of the funds to create public service jobs. House Speaker Tip O'Neill has criticized Reagan for the growing unemployment lines, but so far has not suggested a plan of his own. An aide to the Speaker may inadvertently have best summed up the Democrats' plight. "Our alternative is that the President should advocate an alternative," said the spokesman. "That's our alternative."

Unemployment has historically been a good issue for Democrats, as inflation has been a good one for Republicans. Yet for all the White House worries about G.O.P. fortunes in the fall, it is not clear that Reagan will suffer much politically. Interviewing the jobless across the nation last week, TIME correspondents found relatively few who blamed the President for their plight. Rudy Barker, 62, was laid off in 1980 from his job at a lumber mill in Willamina, Ore., and he has not worked since then. "All this started before Reagan," he says. "It's been coming on for the last two or three Presidents." Says Samuel Ehrenhalt, Middle Atlantic regional commissioner for the Bureau of Labor Statistics: "A lot of people are just not ready to call it quits with the President."

In pushing its revolutionary program of budget and tax cuts to cure the nation of nagging economic ills, the Administration realized that some suffering was inevitable. Indeed, the White House anticipated a rise in unemployment during the early stages of the program; it was felt that a hike in joblessness was necessary to dampen wage demands and cool inflation, which Reagan regarded as the nation's chief economic problem. But Administration officials never expected that the rate would surge so high or inflict so much hardship.

When Reagan took office last January, the unemployment rate stood at 7.4% and the President's Council of Economic Advisers, headed by Murray Weidenbaum, predicted that the average annual rate for 1981 would be 7.8% and that it would rise to 8% for at least part of the year. Instead, the rate dipped to 7% in July, but then began climbing again as the economy started to buckle, partly because of high interest rates. The exorbitant cost of borrowing especially plagued the automobile and construction industries, which in turn affected their suppliers, such as steel, rubber and timber firms. With orders down, layoffs of workers spread.

The surging interest rates were caused in part by the Federal Reserve Board's tight grip on the money supply, a policy designed to bring down inflation. But there is little agreement about other causes. Officials of the Fed blame ballooning budget deficits for kindling more fears about inflation and thus keeping interest rates high. Administration officials complain that the Fed's erratic control of growth in the money supply scared lenders into keeping interest rates high. Whatever the cause, most economists now agree that the unemployment rate will gradually rise into the summer, perhaps hitting 10%, before beginning to dip again. White House officials fervently hope that by fall the rate, no matter how high, is headed in the right direction--down.

High unemployment is not unique to the U.S. It is afflicting other Western industrial democracies as well. (Although Communist bloc nations profess to have no unemployment whatsoever, the severe troubles afflicting their economies belie that ideological stance.) In Canada the jobless rate is 8.6%, up from 7.4% the year before. In the ten nations of the European community, the unemployment rate stands at a postwar high of 9%, leaving more than 10 million unemployed. In France the rate is 8.7% (up from 7.5% in December 1980), in Italy 9.1% (up from 8.3%). In West Germany the figure is 7.3%, the highest since 1956. After the announcement last week that the unemployment rate for Britain and Northern Ireland had reached 12.7%--which meant a record 3 million out of work--Prime Minister Margaret Thatcher was greeted in the House of Commons with opposition cries of "Resign! Resign!"

Joblessness in the U.S. takes on many faces and breaks into many patterns, and some of the trends displayed in December's statistics are especially disturbing. Unemployment among blacks is a record 17.4%. The rate for teen-agers was 21.7% (for nonwhite teenagers the figure is a shocking 39.6%). "Discouraged workers," who have not looked for work in the previous four weeks and thus are not included in the monthly unemployment totals, reached a post-war high of 1.2 million during the last three months of 1981, up from 1.05 million the year before. And the number of people working part time, because their hours were cut below 35 a week or because they were unable to find full-time work, grew to a record 5.4 million, up 360,000 in a single month. The unemployment rate for adult men jumped to 8%, a post-World War II high, from November's 7.2%. Economists consider this figure quite significant, since it indicates a growing number of layoffs among the traditional family breadwinners. The unemployment rate for adult women was lower than for men (7.5%), but the rate of joblessness among women with families to support was also a postwar record 10.7% during the last three months of 1981. And while the burden of joblessness still falls most heavily on blue-collar workers, it is spreading into the ranks of white-collar employees: from December 1980 to December 1981, white-collar unemployment rose from 4% to 4.6%.

Other trends among the work force cloud the statistics. More women and teenagers now seek jobs than ever before, pushing up the number of people in the labor market--and thus the number of unemployed. In 1955, for example, women accounted for 30.2% and teen-agers 6.6% of a labor force that totaled 68 million. In 1980 the comparable figures were 42% and 9% in a labor force that was 57% larger. Both women and teen-agers also change jobs more often than adult men, and this tends to raise unemployment rates. Some experts contend that these tendencies may have inflated the rate by as much as 2.5% over the past two decades.

On the other hand, critics argue that the Labor Department survey, which is conducted monthly among 60,000 households, underestimates the jobless because "discouraged workers" are not included in the figures. Had they been counted in December, for example, the unemployment rate would have reached 9.9%. It is also argued that part-time workers seeking full-time employment should be somehow included in the unemployment figures. If half of the part-time workers were included in the December figures, the rate would have been 11.5%.

The unemployment rate is devastating in two industries, automobiles and construction, that have been wounded by high interest rates. In December, 18.1% of construction workers were unemployed, and joblessness among autoworkers was 21.7 %. That is a drop from 28.6% in May 1980, but auto industry figures are misleading. Many unemployed car workers have given up hope of returning to the assembly line and have sought different careers entirely. The downturn keeps spreading to industries that supply materials to automakers and house builders and is rippling through nearly all manufacturing firms. In past recessions, Government employment rolls tended to rise, but the Administration's efforts to reduce Government spending have stopped that trend. During the past year, 269,000 state and federal employees have lost their jobs.

One notable exception to the distress is in the so-called service-producing sector, which includes transportation, real estate and health care. The service fields employ 66 million people--three times as many as manufacturing firms--and have added 737,000 jobs over the past year. But even this market is softening: the rate of increase in these jobs last year (1%) was down from 1980's increase (2%).

The unemployment lines snake haphazardly across the country, with the Midwest, the Pacific Northwest and parts of the South suffering the highest rates of joblessness. Michigan, with its crippled auto industry, is at the top of the charts at 14.4%, with 627,000 unemployed. Oklahoma boasts the enviable rate of 3.9%, thanks to its thriving oil industry. A survey of the national unemployment scene:

THE NORTHEAST. For the most part, the states from Maine to Maryland have not been hit heavily by the recession. In November, the average unadjusted unemployment rate for the six New England states was 6.2%. The New England Economic Project, a consortium of public and private interests, forecasts the rate for the region will peak at 7.4% in the second half of 1982. Pennsylvania has troubles: the sagging steel industry helped push the state's unemployment rate up to 9.3%. One laid-off Pittsburgh steelworker recalled Reagan's comment two weeks ago that the newspapers were bulging with help-wanted ads. "I read the want ads too," he grumbled. "But I'm not a nurse."

Joseph Fetchik, 44, has been out of work since he was laid off from the Ford plant in Mahwah, N. J., 18 months ago. He signed up for benefits under the Trade Adjustment Assistance program, but the checks will stop coming this spring, and Fetchik cannot find a job. His wife Thelma earns $6,800 a year driving a school bus, but her salary will not nearly support her husband and two children. "I'm in big trouble, and my whole family is going to be in big trouble," says Fetchik.

Deryl Watson, 31, was fired from her $180-a-week job as a security guard at Newark public schools last September. An unwed mother with two children, she receives $168 every two weeks in unemployment benefits and $99 per month for food stamps. "We used to eat spaghetti and meatballs, but now we just have it with tomato sauce," she says. Watson has no intention of applying for welfare because "I want to work. I want to have my own money. Besides, they don't treat you right on welfare. There's no respect at all."

THE MIDWEST. Michigan's woes have spread to nearby states, forcing thousands of layoffs in plants that supply the auto industry. Both Ohio, with a rate of 11.8%, and Indiana, at 12.4%, were among the most ravaged states in the nation. Cities were particularly hard hit. There were 38 metropolitan areas in the U.S. where the unemployment rate exceeded 10% in November, and 14 of them were in the Midwest.

The pain and frustration of unemployment shows up in small yet telling ways. The Detroit Free Press offered to let any and all unemployed job seekers run a free classified ad touting their skills; nearly 5,000 people took the paper up on its offer. At a blood plasma donation center in St. Louis, Director Ron Wilson says business is up 10% partly because more housewives and part-time workers are coming in to collect the $8 paid for every pint of plasma. In Louisville, the number of people calling the city's crisis hot line and asking for food and clothing is up 32% from last summer.

Dzintra Dowling, 37, lives in a three-bedroom house in the Chicago suburb of Brookfield with her two children, ages 15 and 10. She has been out of a job since last October, when she was laid off at International Harvester. Dowling is separated and gets no financial support from her husband. Her weekly unemployment check of $199 ran out weeks ago, and she is "down to my last $20." She is now considering what would be to her a drastic measure: applying for welfare. "This morning I sat down after my son had gone to school and just bawled," she says. "It isn't because I'm worried about myself. It's, my God, what am I going to do with the kids? If it was just me, I could find a room somewhere and live on Campbell's soup and bologna sandwiches. But when you have children, it's different."

In Peoria, Ill., the Caterpillar Tractor Co. will lay off 1,700 workers this week, and those who are about to join the jobless are still disbelieving. "It's like being wounded in battle," says Jim O'Connor, president of United Auto Workers Local 794. "The initial shock is buried. Until a couple of months ago, people were walking around here with Reagan buttons on. Now I'm asking them if they liked inflation and a job better than no job. And they're saying, 'I'd rather have a job and raise hell about inflation.' "

Some who cannot find jobs locally are taking Reagan's advice and "voting with their feet" by moving to other states. When General Motors closed its plant in St. Louis last July and shifted to a more modern factory in Bowling Green, Ky., about 800 of its 900 hourly workers followed from St. Louis.

Some of the jobless who stayed put are struggling to cope. From the Detroit suburb of Hazel Park, Larry Hampton, 26, sets out once or twice a week in his pickup truck to search the streets for scrap. Sheet metal brings a penny a pound; cast iron $45 a ton. On a good day, Hampton earns $15, and it keeps him busy. "I've just got too many bills and not enough money to pay them," says Hampton, who lost his job in a machine shop last November. "It's scary."

Wayne Addison, 39, of Kokomo, Ind., lost his job with Chrysler last August, and has seven children to support, but claims not to be worried. "We've been cutting corners for years," he says. Addison's wife returned to work testing transistors at Delco, a division of General Motors. He buys most of the family groceries directly from farms, spending only $55 a week on food. Addison also barters his services, repairing a neighbor's clothes dryer in exchange for a new shirt. Still, Addison is bothered that his two eldest daughters must pay most of the bills for their weddings this spring. Says the father: "There ain't a man that likes to say, 'Well, daughter, I can't afford it for you.' "

THE WEST. The region is an economic patchwork quilt. Wyoming has an unemployment rate below 5%, California copes with 8.6%, and Oregon and Washington are suffering badly. Because the lumber trade has been crippled by construction woes, Oregon has an unemployment rate of 11.4%; Washington has 11.1%. By the middle of last month, 19,000 of the region's 102,000 sawmill employees had been laid off, while another 41,000 were working curtailed shifts. "It's like Chinese water torture," says John Hampton, chairman of Hampton Affiliates, a Portland-based logging company. "There's been no relief." Two weeks ago, the U.S. Postal Service in Portland announced that it would have between 800 and 1,000 new job openings over the next three years; 18,642 applications flooded in.

Since losing his job as a forklift driver at a mill in Molalla, Ore., last August, James Wittig, 35, has been scrambling for a job. He applied to work as an exterminator and tried to land a job laying gravel. "I'll try anything, but there's nothing," he says. "If there's a job open in Oregon, there's at least 100 people trying to get it." Wittig's wife works as a cook for $360 a month to support him and their two children, but it is not nearly enough. Says Wittig: "I'd like to talk to the President for half an hour. I'd say, 'You're living high off the hog. You're telling us how good everything's going to be in two years. But we're starving today!' "

Hilton Ridgeway, 41, never even got a job in the Northwest. He resigned as a computer programmer in Albany and moved to Oregon with his wife and four children last June, expecting to find a new job easily. After several months of looking, he tried to enlist in the Army, but was too old. Just before Christmas, Ridgeway found six weeks of work at $3.35 an hour on a Christmas tree farm. He doesn't like to recall that until recently he made $30,000 a year.

THE SOUTH. The recession is blooming late in the region. Unemployment rates in many Southern states are below the national average, but they are gradually climbing upward. Georgia (6.8%) and Florida (7.7%) are relatively well off, but other Southern states have already surpassed the national rate: the figure is 10.2% in Arkansas and 10.4% in Tennessee. "We can't see any bright side," says Gene Keenum, a UAW union official in Memphis. "Everywhere we look, they're cutting back." The picture is totally different in booming Texas, where the rate is 4.5%. Says Terence Traviand of the Texas Employment Commission: "There is no sense of crisis here--yet."

Shutdowns and layoffs can be especially devastating in textile-mill towns that depend on only one or two factories for their existence. In Newberry, S.C. (pop. 10,000), the first blow came last month when the Collins & Aikman hosiery plant was closed down, idling 340 workers. Two weeks ago, Newberry Mills began shutting down its obsolete, 98-year-old cotton mill for good; 330 workers are being fired. Unemployment in Newberry County is now 16%, triple the rate of last December.

"I've got two kids in college, and the mill didn't give us any pension," says Everett Mays bitterly. "What kind of a job can a man get who's 48? Damn right I'm scared." Says Mill Superintendent Melvin Blackwell, 59, who also will be fired: "You meet people in the store crying. These people put their whole lives in that mill, their whole heart, and they get nothing out of it. Just a closing."

For white-collar workers thrown out of work, the hardships can be just as painful. Virginia Hall runs a job-counseling club for unemployed professionals in Atlanta, and she has discovered that the psychological toll often exceeds the financial loss. "All these people have mortgages and are committed to certain life-styles," she observes. "In a way, they're more pitiful than the blue-collar workers who are unemployed. This is their first experience of losing a job, and they are stunned. They have no idea of how to cope."

At the community kitchen run by St. Luke's Episcopal Church in Atlanta, about 300 people a day showed up for free hot meals last winter. Today some 500 eat there daily, and Director Bill Boiling believes most of the newcomers are workers who have lost their jobs. "We have always had the derelicts," says Boiling. "But now we're seeing a different type of person--women, children, families." Even in prosperous Texas there are storm clouds on the horizon. Though jobs are still plentiful for skilled workers in Houston and Dallas, the rush of jobless from the North and Midwest has forced some less skilled natives out of work. Charles Croucs, 27, of Fort Worth lost his job as a painter two months ago. He blames outsiders who are willing to work for $6 an hour rather than the $8 or $9 he once collected. Says Croucs angrily: "All those people from up north just flooded the market."

As unemployment casts an ever longer shadow across the country, some labor unions are attempting to save jobs by making concessions to employers on wages and benefits. At troubled Eastern Air Lines, the pilots have agreed, in principle, to a twelve-month wage freeze, while the Teamsters Union struck an agreement three weeks ago with 284 trucking companies that left them with one cost of living increase a year instead of two. The United Auto Workers had been negotiating with General Motors to hammer out a new contract that exchanged "givebacks" in benefits for greater job security and lower car prices, but the talks ended in failure last week (see ECONOMY & BUSINESS). The UAW will nevertheless try to negotiate a similar contract with Ford Motor Co. this week. Charlie Renfro, an axle checker at a Ford truck plant in Louisville, is not happy with the prospect of givebacks but takes a common view: "Half a loaf is better than none."

Many union leaders grumble that they are being unfairly called upon to fight a battle that Washington should be waging, and are demanding that the Administration take some action to curb the recession. AFL-CIO President Lane Kirkland last month blasted Reagan's economic program as "a hodgepodge of crank monetarism and bizarre macroeconomic nostrums," and urged the White House to take immediate steps to ease unemployment. Among the AFL-CIO'S recommendations: revive the emergency local public works program, budgeted at $6 billion in 1975 but not funded since then; restore CETA public service jobs; and create a new reconstruction finance corporation that would extend loans, loan guarantees and tax benefits to hard-hit companies in basic industries. The union also wants to get more help for the long-term jobless by renewing the 13 weeks of nationwide unemployment benefits that the Administration canceled last year.

Kirkland's call for action is being echoed in Congress, but members are divided on what should be done. Senators Kennedy and Quayle defend their $4 billion jobs program bill as sufficiently different from the much criticized CETA program to make it worthwhile. Their bill would forbid local governments to use the federal funds to hire their own employees, such as policemen or firemen. Local businesses would also have a say in setting up job-training programs, thus ensuring that prospective employees were not trained in skills that were no longer in demand.

Many Congressmen and economists reject the remedy of job programs to cure unemployment. "It's like trying to put a Band-Aid on a cancer after it's already grown, instead of preventing it in the first place," says Democratic Senator Bill Bradley of New Jersey. Observes Barry Bosworth, an economist at the Brookings Institution: "A federal job program inevitably turns into nothing more than an income-maintenance program, for the simple reason that when workers graduate from training programs, there are still no jobs for them. In a couple of months, 10 million people are going to be unemployed. To talk of job training is ridiculous. It's a flim-flam." Charles Schultze, who was chairman of President Carter's Council of Economic Advisers, argues that job programs "wouldn't make much of a dent" in recession. One traditional problem is that Congress usually votes for such programs in the middle of a recession, but by the time the money gets around the country the economy has recovered and the added federal spending merely fuels inflation.

Instead of job programs, Bradley suggests a short-term remedy of extending unemployment benefits; he predicts there will be growing pressure from Congress within the next two months as the 2.5 million people who lost their jobs late last year begin to run out of benefits. But in a meeting of the Cabinet Council on Economic Affairs last week, in which unemployment was on the agenda, Reagan and his aides did not discuss the proposal to extend benefits. Said a White House aide: "We feel we need to demonstrate concern for unemployment, but without reinstating benefits that would affect the budget." If the unemployment rate worsens, aides predict, Reagan may move up the starting date of some federal construction projects already approved by Congress, which would produce a limited number of jobs without raising the budget.

The Administration plainly plans to stick to its conviction that its program of tax and budget cuts will revive the economy and eventually cure the triad of economic troubles: high inflation, high unemployment, high interest rates. Liberal and conservative economists tend to agree that the only real solution to unemployment is to focus on the entire economic picture. To a certain extent, though, the Administration's goals are contradictory in a faltering economy. "In large measure, you're stuck with a choice between unemployment and inflation," says Economist Rudolph Penner of the American Enterprise Institute, a conservative think tank. "The politicians who say they will not use high unemployment to cure inflation are just dreaming."

Inflation is indeed dropping: the rate for 1981 stood at 8.9%, down from 12.4% in 1980. The political question centers on how much unemployment the public is willing to accept to continue the battle against inflation. "There are a lot of people out of work now who aren't used to it, from General Motors executives to Oregon timbermen," says Frank Leary of Washington's Urban Institute. "A lot more people are feeling the cold breath of unemployment." On the other hand, inflation touches all Americans, and the country as a whole would pay a price if the White House switched from fighting inflation to combatting unemployment. Warns Federal Reserve Board Member Henry Wallich: "By the time you've made a dent in Detroit's unemployment, you've sent inflation through the roof for everyone." In effect, Reagan is betting he will not have to make that switch, but if the unemployment rate continues to climb, he may have no real choice.

--By James Kelly.

Reported by Gisela Bolte/Washington, with other bureaus

With reporting by Gisela Bolte/Washington, other bureaus

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