US economy rebounds, but thousands of jobs axed
04.02.2004
By MICHAEL FLAHERTY in New York
When Philip Gardner took a research position at Michigan State University in 1985, big corporations were snapping up graduates.
As the US economy rebounded from a recession, he recalled, Midland, Michigan-based Dow Chemical was hiring more than 100 graduates a year, and carmakers hired even more.
Two recessions later, the economy is rebounding again, but the university's once-vast job pipeline is gone.
"Even though earnings are up for a company like Dow Chemical, they're just not hiring that many people any more," said Gardner, who directs the Collegiate Employment Research Institute.
Anecdotal evidence like this doesn't just worry the jobless, their families and friends. The lagging job market could become a tripwire for President Bush in this year's election. An economic recovery without jobs may not sit well with voters, who could side with Democrats suggesting Bush has favoured big business at the expense of workers.
And without a pickup in employment, consumer confidence and spending could take a hit.
Even companies with quarterly profits soaring are shy about adding workers - if they're not laying people off.
"We listened to over a hundred quarterly earnings conference calls and we have not heard from anybody who says they are picking up the pace of hiring," said Richard Yamarone, director of economic research at Argus Research.
US companies continue to look towards India and China for cheaper labour, fuelling fears that new jobs are going to Guangzhou and Bangalore rather than Chicago or Boston.
Factory closures and mass firings made headlines this earnings season.
Last week, Eastman Kodak said it would cut 15,000 jobs as it redefined itself to keep pace with the market for digital products. Kraft Foods said it would cut 6000 jobs and close 20 plants as it reported lower fourth-quarter earnings.
Even companies with soaring profits are cutting back.
Both Dow Chemical and rival DuPont reported higher-than-expected fourth-quarter earnings and gave optimistic forecasts - but still announced plans to cut jobs.
And in a trend consistent across the banking industry, Wells Fargo last month reported strong fourth-quarter profit, but said it cut 7500 of its 10,000 temporary mortgage positions since September, with more on the way.
Meanwhile, only 1000 new jobs were created in December, according to the Labour Department.
John Lonski, chief economist at Moody's Investor Service, predicted job growth could start as early as March, based on the rapid increase nationwide in company productivity.
Henry Willmore, head of US economics at Barclays Capital, agreed.
"We've already started to see this happen," he said, as the financial-services industry has started adding jobs for the first time in years.
He said more job postings could be expected this quarter, but not the glut of hiring in the post-recession mid-1980s.
But Gardner remains sceptical.
"Economists keep saying that these companies should be hiring," he said. "But they're not."
- REUTERS
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