With layoffs mounting and spreading to every industry, the nation's economy has quickly gone from full employment to one where laid-off tech workers and stockbrokers are competing with out-of-work bellhops for low-wage jobs.
The shift, accelerated by the terrorist attacks, has been so swift in some places that employers who only months ago were raiding rivals for workers and offering them bonuses now are being inundated with applications. Turnover has fallen sharply. Service is said to be improving, even as many retailers have scrapped or postponed hiring for the holidays.
"We're pretty much in the driver's seat now," said James Bastidas, general manager of a new Red Robin Gourmet Burgers in Portland, Ore. Over the last two months, as he was getting his restaurant ready to open, Bastidas collected more than 1,700 applications. He said they included college graduates who stood in long lines with laid-off factory workers for a shot at 165 openings. Average pay: $6.50 to $9 an hour.
"It blew me away," Bastidas said.
Although Oregon's labor market has deteriorated more rapidly than most--its unemployment rate jumped to 6.3% in August from 4.9% a year earlier--the pace of layoffs has quickened throughout much of the country.
In the third quarter, U.S. employers announced almost 600,000 job cuts--about 50% more than in each of the previous two quarters, according to Challenger, Gray & Christmas Inc., a Chicago outplacement firm. That included more than 200,000 cuts in the wake of the Sept. 11 attacks. Already this year, companies have announced more job cuts than they did during the 1990-91 recession years, Challenger Gray said.
By the government's measure, the change in payrolls and the overall unemployment rate (4.9% in September) doesn't look as bad as previous recessions. But there were huge job losses in September, and that includes the effects of last month's events, which are now working their way through the economy.
What's more, layoffs have spread well beyond manufacturing and high-tech firms, which have been in retreat for the last year. In the last two weeks, a broad range of service companies, including McDonald's, Fidelity Investments, Kinko's and Pebble Beach Co., have been among about 200 employers that have announced cuts of at least 85,000 jobs, according to compilations by JWT Specialized Communications, an employment and marketing firm.
"A few hundred thousand travel industry employees have or will lose their jobs, and they're going to spend less on TVs, restaurants and holiday shopping," said David I. Levine, a UC Berkeley economics professor. "And people who make TVs, work in restaurants and sell clothes will in turn lose their jobs."
Levine, who was a senior economist on the Council of Economic Advisors in the Clinton administration, said the recession has so far been moderate. The unemployment rate is still low by historical standards, and he thinks most of those out of work will land new positions, albeit lower-paying ones in many instances. To stimulate growth in the economy and the labor market, Levine said the government should continue on its course of cutting interest rates, moving to lower taxes in the short term and increasing spending.
But that may not come fast enough to deal with the sudden deluge of the unemployed. Initial unemployment benefit claims shot up to 538,000 in the last week of September, amounting to 1.6% of the total labor force. That's a bigger share than in July 1990, when the economy last entered recession, according to Economy.com, a consulting firm.
The labor market shift has had a dramatic effect for restaurant and retail businesses. In the last two months, the restaurant industry shed 68,000 from payrolls, accounting for one-fourth of the net job losses nationwide in August and September, according to the Labor Department. And now tens of thousands of newly laid-off hotel and tourist workers are adding to the intense battle for many of these jobs.
It wasn't that long ago when Marie Callender's Restaurants was so strapped for workers that it sent, at great expense, a dozen Southern California employees to a Houston outlet so the short-handed restaurant could open on time.
But today, the Orange-based chain of 157 restaurants nationwide has far more qualified candidates than it has positions. Applications have jumped by about 25% in the last six months, with a large uptick since Sept. 11, the company said. "We're getting people who've been laid off from more expensive restaurants and are trading down to come here," said Phil Ratner, Marie Callender's chief executive.
Businesses say employee turnover, which is notoriously high in retail and restaurants, has eased. Steve Standlea, human resources director for Mimi's Cafe, which has 53 eateries in California and four other states, said 342 of its waiters, cooks and other hourly employees quit in the third quarter. That's down 25% from the same quarter a year ago, he said.