THE NUMBERS GAME

December 4, 1998
	The stock market remains strong, and unemployment rates reached 4.4% today. Despite such positive indicators, some companies are announcing layoffs. How strong is the economy?

Nov. 17, 1998: The Federal Reserve cuts interest rates, again Oct. 15, 1998: The Nobel Prize winner for economics discusses the economics of poverty. Oct. 8, 1998: President Clinton addresses the IMF and World Bank annual meeting Sept. 29, 1998: The Federal Reserve cuts the prime interest rate. Browse the NewsHour's coverage of economy.      U.S.Treasury Bureau of Labor Statistics Federal Reserve Board	ELIZABETH FARNSWORTH: Today's announcement that the jobless rate fell to 4.4 percent in November took many analysts by surprise. Declining exports have triggered job losses in some sectors; and until last month, unemployment had slowly crept up from its springtime low. At the White House this morning, President Clinton welcomed today's news. PRESIDENT CLINTON: In November, the economy added more than a quarter of a million jobs, which means now America has created about 17.3 million jobs in the last six years. That is a very good record of which the American people can be very proud. ELIZABETH FARNSWORTH: But the president also warned that continuing financial turmoil in Asia remains a threat to the US economy. PRESIDENT CLINTON: This is not a time for self-congratulation or a time to rest. We have more to do here at home and more to do to stabilize the global economy if we expect economic growth to continue. We all know about the economic troubles in Asia. ELIZABETH FARNSWORTH: Indeed, the Asian crisis has been blamed for this week's announcement of more layoffs at Boeing. The Seattle Aerospace Company now plans to cut 48,000 jobs over the next two years. MERLEN GRAF, Boeing Worker: Hey when they're selling planes, there's work, and when we don't sell 'em, there's no work. It's no different whether you work here or the grocery store. LARRY MCCRACKEN, Boeing Spokesman: What we have seen is that the Asian airlines have had a decrease in their growth. They are only growing at about two percent versus six percent the last year. We have looked to see that happening in the future, so we have decided to reduce our production rate, which then correlates in a reduction in employment. ELIZABETH FARNSWORTH: Other companies are also cutting jobs. Kellogg said this week it would trim 21 percent of the salaried work force at its Michigan headquarters. And health care giant Johnson and Johnson plans to eliminate more than 4,000 jobs or about four percent of its total work force. Corporate mergers have also resulted in layoff announcements this week. Monday's word of a takeover of Bankers Trust by Deutschbank could mean job losses for about five thousand, five hundred people, mostly in New York and London. And if the proposed Exxon-Mobil merger announced Tuesday goes through, up to 9,000 workers worldwide could lose their jobs. The low November unemployment numbers announced today do not reflect the layoffs announced this week. Wall Street was heartened by today's news. Stocks went up across the board today.
	Good jobs.
	ELIZABETH FARNSWORTH: And joining me now are John Challenger, CEO of Challenger, Gray, & Christmas, a corporate job placement and search form, and Lisa Lynch of Tufts University's Fletcher School of Law & Diplomacy. She was chief economist for the Labor Department from 1995 to 1997. Ms. Lynch, first on the news jobs being created, where were those ¼ million new jobs created last month created? LISA LYNCH: Well, the majority of the new jobs were coming out in three primary areas. And the construction industry continues to grow healthily. Over the year we've had over 300,000 new jobs added in the construction industry. In services, there was a very large job growth, the highest since May of this year. In particular, in computer, data processing area and the retail sector there was job growth and in the temporary help industry is as well. ELIZABETH FARNSWORTH: And Ms. Lynch, how much did the holiday season play? How big a role does that play in this November job growth? LISA LYNCH: Well, we've seen a pick up in both retail and also eating and drinking establishments that appears to be associated with the holiday season. But these are beyond sort of normal seasonal factors, so clearly, retailers and eating and drinking establishments are gearing up for what they hope to be a very profitable holiday season. ELIZABETH FARNSWORTH: John Challenger, are these good jobs? Do they pay well? JOHN CHALLENGER: They are good jobs. They are good jobs. Companies today are creating knowledge jobs. A lot of them are computer technology-related jobs. We're not turning back to a nation of hamburger flippers. Companies need good people. But really it's been what's propelling this economy. ELIZABETH FARNSWORTH: And Lisa Lynch, are these jobs going to all sorts of people, or are they going more to young people, more to old people, is any racial group favored more than any other? LISA LYNCH: Well, what we see in the report is that across groups - you know - unemployment rates are very low. The group that had the biggest fall in unemployment rates this month were white males. But when you look more closely at the numbers, you see that what really seems to drive your success in the labor market is your educational and your skills background. If you look at the unemployment rate for college graduates, it's less than 2 percent. If, instead, you look at high school dropouts over 7 percent of them are out of work. So there's a huge differential within the labor market on the basis of your educational skills that you have.
	The layoffs.
	JELIZABETH FARNSWORTH: And John Challenger, how is this affecting wages? JOHN CHALLENGER: Wages continue to be going up moderately. Companies today are facing tight labor conditions. That gives the seller - the job seeker - better leverage, but people are negotiating for better rates of pay. There's more pay for performance today. So if you're productive can make impact on a job that's also going to up your compensation rate over time. ELIZABETH FARNSWORTH: So, Mr. Challenger, explain how this fits into this - the layoffs. At the same time as we have the low unemployment rate, we also have many layoffs, not just the recent ones we mentioned, but over the past year there have been a great number of layoffs. Explain both. How do they fit together? JOHN CHALLENGER: Well, it can seem paradoxical that unemployment is going down, yet, layoffs are going up. You'd think maybe companies are either laying off people en mass, or they're hiring rapidly, but that's just not the case. It's a much more complex economy today. What's happened is we've got a just-in-time kind of workplace environment. Companies today have - we've deregulated industries, but we've created global competition, and so in each industry there are going to be more winners and losers. What happens is that companies that are doing well and gaining market share, adding profitability, are hiring people and, in fact, hiring lots of people, but those companies that are losing out, that are losing market share, are willing to get out of areas where they're just not doing very well, are cutting jobs rapidly. Today companies just don't wait to make those changes, so, whereas once you might have seen Decembers where companies held off on layoffs, there was kind of a taboo against cutting people during the holiday season, that just seems to have disappeared, because companies have got to get it done now, but they're also hiring now; they're not deferring hiring until January as well. ELIZABETH FARNSWORTH: So, Lisa Lynch, looking at the economy as a whole, where are most of the layoffs, not specifically, but what areas? LISA LYNCH: Well, the big sector that has been hurt over the years has been the manufacturing sector. Since the peek in March of this year we've lost almost ¼ million jobs in manufacturing. And that's not taking into account the recent revised figures that Boeing announced this week of additional layoffs in its aircraft production affecting, in particular, the workers in the Seattle area, the announced numbers for Johnson & Johnson, and other firms as well. But manufacturing as a whole in this report we see that there were declines across the board and industrial equipment was affected, and machinery, and a lot of that appears to be driven, in part, by what's happening in other parts of the world, not what's happening necessarily here at home. ELIZABETH FARNSWORTH: So, Ms. Lynch, you mean in the Boeing case. That's largely because they aren't ordering the same numbers of airplanes that they hoped they would. LISA LYNCH: That's right. ELIZABETH FARNSWORTH: In Asia. LISA LYNCH: The weakness in the Asian economy clearly has had a tremendous impact on the capacity of Boeing to grow its business. I think the good news that we got yesterday on the European front was that with the across-the-board cut in interest rates in Europe maybe there is some hope - moderate hope - for the manufacturing sector in the United States that there will be a better-than-expected growth in Europe, and that may help pick up some of the loss of demand that we've experienced coming from Asia. ELIZABETH FARNSWORTH: And John Challenger, you went into this a little bit, but what would be other specific reasons for layoffs, if it's not because you're not having the same number of airplanes ordered or the orders haven't gone through that you hoped would - specifically why would you lay off? JOHN CHALLENGER: Well, another factor has to do with mergers, and this Exxon-Mobil merger is indicative of that kind of change as well. We are seeing mergers unlike any other year in history. The five top mergers of all time have occurred since April, and many companies - once they make those decisions to buy or acquire other companies - sometimes competitors and sometimes suppliers - often let go people, duplicated people at secondary headquarters operations. It might mean gas stations that are sitting on adjacent corners or branch banks in the same way. It might mean warehouses and plants that are covering the same city or region, but mergers often mean job cuts - sometimes right away and sometimes down the road.
	The economy keeps doing the right thing.
	ELIZABETH FARNSWORTH: And how long is it taking people who are laid off to find new jobs? JOHN CHALLENGER: Well, it's a great job market. We're seeing average search times right now about 2.6 months. That's way down from a norm of 3.3/4 months. It is a very positive, favorable job market. People are finding good jobs, and they're finding them quickly. The tough parts is you have to do that much more often in a career today. You might have a decade - certainly before had hoped to work for one company for life, but that's just not available anymore. ELIZABETH FARNSWORTH: So Lisa Lynch, looking at these two trends that could seem contradictory but you're explaining why they're not -- the low unemployment and all these layoffs. Are workers very, very insecure now like they were in the earlier period, say '93, when there were a lot of layoffs? LISA LYNCH: Well, I think if you don't have some college or college education, you are insecure, because this is an economy that is rewarding skills. We're in the middle of an investment-led recovery. A lot of companies have been investing in computers information technology. And if you're laid off from a job and you're not up to speed in these new technologies and not able to get trained quickly on that. We're going to find that, yes, there are a lot of jobs out there, but you don't have the skills set that an employer is looking for. ELIZABETH FARNSWORTH: Do you have anything to add to that, John Challenger? JOHN CHALLENGER: Well, it is - you know, it's a good job market. You know, it is a job market that's inclusive. It's bringing a lot of people in, but we are short of people with skills. There's really negative unemployment in the high-tech sector, and that doesn't just mean the high-tech industry. Every company today is infusing its workplace with technology. And one of the good things that's happening, semiconductors, we've seen a lot of layoffs in that industry, prices are falling. There's a glut in the market, but this economy has been so resilient for such a long time, and one of the byproducts of that - those dropping prices is it's allowing more and more companies and people to get that technology because it's a - it's cheap. So, in an uncanny way this economy keeps on doing the right thing. ELIZABETH FARNSWORTH: Well, John Challenger and Lisa Lynch, thanks very much. LISA LYNCH: Thank you. JOHN CHALLENGER: Thank you.

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