Forecast for U.S. workers: Gloom

Peter S. Goodman
IHT
Wednesday, July 2, 2008

As automakers dropped their latest batch of awful sales numbers on the market on Tuesday, reinforcing the gloom spreading across the economy, the troubles confronting American workers seemed to intensify.

Plummeting home prices have in recent months eliminated jobs for hundreds of thousands of people, from bankers and real estate agents to construction workers and furniture manufacturers. Tighter lending standards imposed by banks in the wake of huge mortgage losses have made it hard for many Americans to secure credit — the lifeblood of expansion in recent years — crimping the appetite of consumers, whose spending amounts to 70 percent of the economy.

Joblessness has accelerated, and employers have slashed working hours even for those on their payrolls, shrinking the size of paychecks just as workers need them the most.

Now, add to that unsavory mix the word from automakers that sales plunged in June — by 28 percent for Ford, 21 percent for Toyota and 18 percent for General Motors — a sharp sign that consumers are pulling back, making manufacturers more likely to cut production and impose more layoffs. Until recently, the weak labor market has been marked more by the reluctance of employers to create new jobs than by mass layoffs.

Among economists, the sense is broadening that the troubles dogging the economy will be stubborn, leaving in place an uncomfortable combination of tight credit and scant job opportunities perhaps well into next year.

"It's a slow-motion recession," said Ethan Harris, chief United States economist for Lehman Brothers. "In a normal recession, things kind of collapse and get so weak that you have nowhere to go but up. But we're not getting the classic two or three negative quarters. Instead, we're expecting two years of sub-par growth. Growth that's not enough to generate jobs. It's kind of a chronic rather than an acute pain."
FULL ARTICLE @ IHT