Hiring revival in U.S. is still long way off

By David Streitfeld
Los Angeles Times

The economy roared last quarter, and so did Falcon Plastics Inc.

A family-owned firm in the eastern South Dakota city of Brookings, Falcon posted record sales in September. Yet there's no impulse to celebrate, no rush to hire. The bad times are still too vivid.

"We want to make sure that when we add someone, we won't have to turn around in three months and let them go," said Jay Bender, president of Falcon.

Multiply Falcon's situation by tens of thousands of other companies, and a picture begins to develop of an economy scaling a wall of worry.

Employers added a net 126,000 payroll jobs in October. In all, the economy has added 286,000 positions over the past three months — the best quarter since early 2001.

But another 2.4 million jobs would be needed to regain all the ground lost since March 2001, when the last recession began. When, or if, those positions will come back is far from clear.

Here's the problem: Many companies like the notion of a jobless recovery. The leaner they can keep their payrolls — by using overtime, automating the production process and outsourcing jobs overseas — the higher their profits.

The murky hiring picture affects not only the 8.8 million unemployed but the 1.6 million who want a job but aren't actively looking for work. It affects millions more who want a full-time job but must get by with part-time work. And it weighs on the more than 130 million employed.

"The greatest single concern people appear to have about the economy is jobs," investment house Fred Alger said in its November market review. "We have companies and an economy that can shift gears quickly, but not the kind of job creation and job security that people understandably seek."

For Falcon, as for many companies, the 2001 downturn was swift and harsh. Annual sales tumbled from $20 million to $14 million. The roster of 305 employees shrank to 175. "Sometimes," Bender said, "you have to cut off your arm to save your life."

The emergency surgery was successful. For the fiscal year that ends in April, Falcon is likely to hit sales of $20 million again. But employment is back to only 200 workers. Any further growth, Bender said, "will be incremental. We're still very cautious."

So, too, are consumers. Although the economy expanded during the third quarter at its fastest rate in 19 years, people's confidence in the future remains "middling," noted Richard Curtin, who directs the University of Michigan's monthly consumer survey. The tenuous job situation is a big reason.

"It used to be understood that when business weakened, layoffs went up. When it improved, people were called back to do the same jobs at the same employers," Curtin said. "Now, if people lose their jobs, they have to find new skills and a new job at a new employer. It's a more daunting challenge."

It's one that many stand to face, even as the economy picks up steam. The job placement firm of Challenger, Gray & Christmas reported that planned layoffs at U.S. businesses were 171,874 in October, more than double September's total and the highest in a year.

In some cases, job cuts are accompanied by solid earnings reports. Boise Cascade Corp. said sales increased 9 percent in the third quarter and profit rose 286 percent. But the wood products firm is continuing layoffs, which have reduced the number of employees by 460 this year and will lop off an additional 90 during the fourth quarter.

Electronic Data Systems Corp. fulfilled Wall Street's expectations for the third quarter, but the computer services company nonetheless announced it would cut an additional 2,500 jobs, its third layoff in a year.

One major company going against the trend is IBM Corp., whose chairman, Samuel J. Palmisano, says he foresees the need in 2004 "for approximately 10,000 new positions in key skill areas."

IBM has 315,000 employees, roughly the same number it had when the boom peaked in 2000.

But fewer than half its workers are in the United States, and Palmisano didn't specify where the hiring would take place.

Alliance@IBM, a union representing workers at the technology company, said the announcement was a "smokescreen" for the many IBM jobs being transferred overseas, where they would be filled by Indian or Chinese software engineers.

Analysts say 150,000 jobs must be created every month to keep pace with population growth. Only if more than that number are created would the unemployment rate, currently 6 percent, continue to fall.

"There can't be a jobless recovery," Treasury Secretary John W. Snow recently told the Economic Club of Washington. "The nature of a recovery is to recover. You don't recover if lots of people are looking for work and can't find work."