Millions of jobs that were cut won't likely return
Where did the jobs go? Higher productivity allows employers to get by with fewer workers
On Thursday May 13, 2010, 3:10 pm EDT ,
WASHINGTON (AP) -- Fewer construction workers will be needed. Don't expect as many interior designers or advertising copywriters, either. Retailers will get by with leaner staffs.
The economy is strengthening. But millions of jobs lost in the recession could be gone for good.
And unlike in past recessions, jobs in the beleaguered manufacturing sector aren't the only ones likely lost forever. What sets the Great Recession apart is the variety of jobs that may not return.
That helps explain why economists think it will take at least five years for the economy to regain the 8.2 million jobs wiped out by the recession -- longer than in any other recovery since World War II.
It means that even as the economy strengthens, more Americans could face years out of work. Already, the percentage of the labor force unemployed for six months or longer is 4.3 percent. That's the highest rate on records dating to 1948.
Behind the trend are the cutbacks businesses made in the recession to make up for a loss of customers. To sustain earnings, they became more productive: They found ways to produce the same level of goods or services with fewer workers. Automation, global competition and technological efficiencies helped solidify the trend.
Diminished home equity and investment accounts have made shoppers more cautious, too. And their frugality could endure well into the recovery. That's why fewer retail workers, among others, will likely be needed.
Among those whose former jobs may be gone for good are:
-- Julie Weber of Milwaukee, who designed office cubicles for nearly seven years. She lost her job about a year ago. Since then, she's been able to find only part-time work outside her field. Interior design was hammered by the real estate downturn. "My hope for getting back into the industry is not very high," says Weber, 29.
-- Erik Proulx, 38, a former advertising copywriter in Boston, who finds more companies are turning to social media and viral marketing and are less drawn to agencies that focus on traditional TV and print ad campaigns. Proulx was laid off in October 2008 -- the third time an employer had cut his position or had closed. He no longer wants to rejoin the industry. Proulx has started a blog to help other unemployed ad professionals network.
-- Louis DiFilippo, 30, who decided to study information technology after losing his job managing a gourmet food store in Washington, D.C. After six months of unemployment, he embraced a career with more stability. He now works on computer network security for the Navy. "I'm much happier now," he said.
More than one-third of chief financial officers at 620 big companies surveyed in March by Duke University and CFO magazine said they didn't expect to restore their payrolls to pre-recession levels for at least three years. Nearly all cited higher productivity and tepid consumer spending.
"Companies have just figured out, 'We didn't want to fire people ... but now that they're gone, we've realized that we can get by without them,'" said John Graham, a Duke finance professor who directed the survey.
Productivity grew at an annual rate of 6.3 percent in the year ending in March, the Labor Department said this month. It was the largest increase in 48 years, though most economists think that pace isn't sustainable.
In the long run, more productive workers raise standards of living: Companies can pay more without inflating prices. But in the short run, high productivity delays hiring.
U.S. employers did add 290,000 jobs in April. The unemployment rate rose to 9.9 percent, though, because 805,000 people without jobs poured into the labor force to seek work.
Three industries, in particular, where many jobs may not be coming back are retailing, manufacturing and advertising.
Retailers have lost 1.2 million, or 7.5 percent, of jobs that existed before the recession, according to Labor Department data. Circuit City and Linens & Things have collapsed. Starbucks closed nearly 800 U.S. stores. Robert Yerex, an economist at Kronos, a work force management company, estimates 20 percent of those jobs are never coming back.
Manufacturing has shed 2.1 million jobs, or 16 percent of its total, since the recession began. Goodyear Tire & Rubber and Boeing Co. laid off a combined 15,700 people during the recession. General Motors eliminated 65,000 through buyouts and layoffs. And as Americans buy fewer cars and homes, more than 1 million jobs in the auto, steel, furniture and other manufacturing industries won't return, according to estimates by Moody's Analytics.
Advertising and PR agencies have lost 65,000 jobs, or about 14 percent of the pre-recession total. Moody's Analytics estimates those industries will lose even more within five years.
In addition, a consolidated airline industry has shed layers of jobs that won't likely return. Delta Air Lines earlier this year spread out departure times for flights from its Cincinnati hub, rather than bunching them at peak travel times. That way, it could operate from one concourse rather than two, said Kent Landers, a spokesman. The change allowed a Delta subsidiary, Regional Elite Airline Services, to cut more than 700 baggage handling and other ground services jobs.
More than half the 15.3 million people out of work in April said they regard their layoff as permanent, the Labor Department said. That's the highest proportion on records dating to 1967. In previous recessions, workers often endured only temporary layoffs: Their employers would recall them once business picked up.
Caterpillar Inc. has resumed hiring after laying off 19,000 full-time workers during the recession, thanks to rising demand for its construction and mining equipment. But most of the new jobs will be overseas. Of the 9,000 hires CEO Jim Owens said Caterpillar plans to make this year, only 3,000 will be in the U.S.
Many economists say eventually, companies won't be able to squeeze any more work out of their employees. That would force employers to step up hiring.
But Janet Yellen, president of the Federal Reserve Bank of San Francisco, cautions that this won't happen anytime soon. She believes corporate America remains in the early stages of a drive for greater efficiencies.
"We may be in store for ... high productivity growth for some time," she said in a speech this year. "If so, the rate of job creation will be frustratingly slow."