Employers Skittish over Economy, Rising Prices

Employers have shed jobs for three straight months, more evidence that the economy could be contracting. While the pace of layoffs is not as sharp as in previous recessions, the combination of rising food and energy prices, along with the real estate downturn, has employers very cautious.

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ROBERT SIEGEL, host:

From NPR News this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris.

For along time, the job market remained fairly strong despite the country's economic problems. Well, not anymore. After four years of employment growth, more than 200,000 jobs were lost in the past three months. That's according to the U.S. Labor Department.

Our labor correspondent Frank Langfitt joins us now in the studio.

Hello, Frank.

FRANK LANGFITT: Hi, Michele.

NORRIS: Why is this happening?

LANGFITT: Well, you know, the whole crisis began back with the falling house prices here in United States. And now, you've got more problems. You got the credit crunch, you've got the trouble on Wall Street, and it's spreading across the economy and across the job market.

Now, last month, we've lost about 51,000 construction jobs. And that's to be expected. I mean, the housing market is a mess. But things are spreading beyond that. You see slower growth in restaurants and in retail trade, we just lost 12,000 jobs.

NORRIS: Now retail, is usually pretty strong, what changed?

LANGFITT: Consumers are worried. I mean, the value of their houses are down, in some cases, down a lot. Portfolios, stock portfolios are down, and people are paying more for gas and food.

So what they're doing is pulling back. They're spending less money. And so employers of all kinds are either shedding workers or they're being lot more careful about hiring.

You know, Michele, to get a feel for what's going on there, what's behind the numbers, I talked to a few businesses this week.

The first place I went was Siebels.

(Soundbite of plate clattering)

LANGFITT: It's a family-owned, family-style restaurant in Maryland, just a few miles off I-95. There's flowered wall paper and homemade ice cream.

Lyn Martins(ph) is one of the managers. She says the housing crisis and high fuel costs have her customers ordering cheaper dishes.

Ms. LYN MARTINS (Manager, Siebels): Steaks are down. Yeah, lamb chops are down. I have a lot of returning clientele up, lot of people eating breakfast, lunch and dinner in here. So, they're, you know, leaning towards chicken ala king as opposed to stuffed chicken with crab meat.

LANGFITT: Her revenues are down 15 to 20 percent. Milk and egg prices are up. So now, she is turning to her workers to cut costs. Martins has already slashed hours. Earlier this week, she called a staff meeting. Here's what she told them.

Ms. MARTINS: Now, the people that are producing will keep their hours, and if I feel you're not producing that, if we have lag times, I'm going to be looking for the ones who keep themselves busy. And if everybody manages to keep themselves busy in production, even if we don't have the customers, they can stay on the schedule, but otherwise, I might need to cut some hours.

LANGFITT: Martin hasn't laid any one off yet, but…

Ms. MARTINS: I also let them know that summer was coming up and that I would not be hiring for summer.

LANGFITT: This is what's happening in the restaurant business. Employment is still growing, but more slowly.

In recent months, growth has fallen by more than half. That's not enough to offset bigger loses in other sectors. Lawrence Katz is a labor economist to Harvard.

Dr. LAWRENCE KATZ (Labor Economist, Harvard University): It isn't that there are so many more people losing jobs, it's just employers are very hesitant to hire, and that's typically what happens as you enter a recession.

LANGFITT: Another thing you see when you start to enter recession, a drop in temp workers. So far this year, nearly 60,000 temp jobs have disappeared.

Cathy Page works as a vice president with Manpower, the temp staffing giant. She says consumers are spending less, so manufacturers don't need as much help.

Ms. CATHY PAGE (Vice President, Manpower, Inc.): My second biggest client called me and said, you know, that we have no need for 60 people on the second shift right now. We just don't have enough product going out the door.

LANGFITT: Page says the drop in demand has been gradual - nowhere near as steep as past down turns. But her clients remain nervous.

Ms. PAGE: There's a lot more trepidation in making hires. People are working a lot slower to get the right hires. Part of that is making sure we have the right fit, and the other part of it is, hey, let's not rush to spend that money, let's take a little time.

(Soundbite of construction)

LANGFITT: And the downturn sparked by the housing collapse two years ago continues to ripple through related businesses.

(Soundbite of horn blowing)

LANGFITT: Like moving companies, Jodi Koons(ph) has a small moving business. He's been at it for 15 years. I talked to him on a loading dock earlier this week.

I just wanted you to tell us how is business these days given what's going on with the economy?

Mr. JODI KOONS (Businessman): Horrible. It's the worst year I have ever had in my entire life.

LANGFITT: Koons' revenues have dropped by more than a third.

Mr. KOONS: Bottom line is housing market is down, nobody is buying, nobody is selling, there's nobody moving.

LANGFITT: And it's not just ordinary homeowners. Koons works on contract for Hilldrup, a moving company based in Virginia. Hilldrup's chairman, Charles McDaniel, says businesses are more hesitant to move their employees these days.

Mr. CHARLES McDANIEL (Chairman, Hilldrup): Corporate clients are trying to avoid expenses. They are trying to cut expenses, so they don't move unpaid by unless they have too.

LANGFITT: On the other end, movers like McDaniel and Koons are getting squeezed on fuel.

Mr. KOONS: Hey, if you go back, say, two years ago, the average price of diesel, if you look at the quotes, it's probably around $1.98 a gallon. Now, okay, two years later, you know, I just ran to Florida. Florida it's $4.03, Georgia it's $3.98.

LANGFITT: And all those trips add up.

Mr. KOONS: On an average day, you go through 10,000 gallons of diesel a year. Normally, it will cost you $20,000. Well, now, it costs me $40,000, so that just took $20,000 out of my pocket.

LANGFITT: So, what does someone like Koons do? Lay people off. Today, he's loading up a shipment for New Jersey.

He's carrying a box of lampshades into the truck, but it's just Koons and his last remaining employee.

Mr. KOONS: Normally, I have three people that I employ that work for me exclusively. Well, right now, I'm down to one.

I mean, I can't afford, usually if you have three guys in a crew and you're steady, you can work. I mean, I struggled to make it as long as I could, hang on to them.

LANGFITT: But a couple of months ago, he had to let two go.

Mr. KOONS: You can't haul furniture and not make money. Why work if you're going to go on a hold?

LANGFITT: Are there other cuts you're going to have to make on your spending if this goes on?

Mr. KOONS: The next cut will be looking for a new job.

LANGFITT: What would you do?

Mr. KOONS: I have no idea, to be honest with you.

NORRIS: We're back on the studio now with Frank Langfitt.

It's a pretty bleak picture there - someone who's talking about losing money even if he works. We don't know for sure if we are or are not in a recession, but how do these job losses compare to past downturns?

LANGFITT: Well, this is the one silver lining. I mean, so far we haven't seen a sort of giant lay-offs that we have in the past. I mean, last month we lost 80,000 jobs. But if you went back to '90 and the '91 recession, job losses on average were about 200,000 a month.

NORRIS: Thank you, Frank.

LANGFITT: Happy to do it, Michele.

NORRIS: That's NPR's labor correspondent Frank Langfitt.

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U.S. Economy Lost 80,000 Jobs in March

The U.S. economy lost 80,000 jobs last month, according to the Labor Department's closely watched jobs report, out Friday. The figure represents the worst monthly job losses in five years.

The numbers, worse than many economists had expected, are adding to fears of recession.

The job cuts pushed the unemployment rate to 5.1 percent from 4.8 percent the previous month.

The latest snapshot reinforces fears that the subprime mortgage crisis and tighter consumer credit are taking their toll on the nation's economy.

The unemployment rate is the highest since September 2005, when significant job losses due to Hurricane Katrina.

Nariman Behravesh, chief economist at Global Insight, told NPR that he believes the biggest worry is weakness in the service sector.

"That had been the powerhouse up until recently," he said. "The service sector provides 80 percent of jobs in the U.S., so the fact that it's so weak is very troubling."

In addition, the Labor Department revised upward its figures for the last three months to show that the total jobs lost over the period is 232,000.

"It looks like a lot of businesses are pulling back and delaying hiring — or laying people off," as NPR's Chris Arnold tells Renee Montagne.

Nariman Behravesh says the figures reveal that any industry related to housing is down.

"There's a lot of pain in manufacturing; there's a lot of pain in the construction [sector]," Behravesh said.

"We're in a recession — I think the only question now is, how deep," Behravesh said. He added that so far, he expects it to be a mild one.

Analysts say the jobs report could make it more likely that the Federal Reserve will continue to cut interest rates in an effort to stimulate the economy into more growth.

From NPR reports and the Associated Press.

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