With a son in law school and a daughter in college, 54-year-old Frank Stevens, believes his professional life is about to unravel.
Stevens, a salesman in the high-tech sector, senses that the consulting company he works for is going to shut down, unable to compete in the tightening economy.
Although the 6-month-old Southern California firm is a subsidiary of a major company in the Midwest, Stevens — who asked that his real name not be used — says the start-up satellite business doesn't have the marketing or advertising dollars from the company necessary to grow.
"They don't have money," says Stevens, who sells the company's computer networking services. "They are cutting back."
He took the job, after 20 years at another major corporation, because of the high salary and the bracing challenge. Now, he has withdrawn $40,000 from his seven-figure savings, because the sales commissions he depended on have dried up. He is selling real estate to pay off debt. And he's looking for a new job.
One day it's Sears, Roebuck & Co. cutting thousands of jobs. Then, it's Rupert Murdoch "consolidating" the Fox News online division, where hundreds were handed pink slips. After almost a decade of growth, an economic slowdown appears to be coming to both traditional and new-economy businesses in the United States. Although the unemployment figures are still very low, there's instability, signs of possible turmoil and worry.
Most Americans don't save money, let alone prepare for financial doldrums. But soon they may have to adjust to a shrinking economy with fewer jobs and less disposable income. For some people it will be déjà vu all over again, reliving the 1982 and 1991 downturns, which eventually reversed. For younger workers used to moving around freely, it may be their first experience of shrinking opportunity.
While such conditions could initially discourage and depress people, psychologists with expertise in financial issues say it's not all doom and gloom: Business cycles are inevitable, and dips help society return to core values of family, friends and community. Eventually, philanthropy, banding together and frugality become fashionable in lean times, as consumerism was trendy in booms.
Economists tell us the economy is slowing down, but not quite as badly as prior downturns of the past two decades, when growth lingered at 1.5 percent. The Commerce Department, in its latest figures, reports the third quarter U.S. gross domestic product last year was only 2.2 percent. That's down sharply from a 5.6 percent rate set in the second quarter, and is the slowest growth in four years.
Still, don't start using the R-word — we're not experiencing a recession, which is defined as two consecutive quarters with negative economic growth.
At times like these, psychologists say the most important thing is not to panic. People need to take a realistic look at their finances and consider the worst.
"When money starts getting tighter, people have to start looking at their budgets and determine what they can do without," says Maurice Elvekrog, a psychologist and chartered financial analyst from Bloomfield Hills, Mich. "Parents should talk to their children about economizing, explaining that they may have to do without some things but that the family will remain together and manage."
Back in California, Stevens forewarned his children during Christmas about his situation. "I spoke to them honestly," he says. "They are old enough not to have to be shielded from life." Tuition for the kids will still be met, but gift giving will be curtailed, Stevens told the family in a pre-Christmas gathering.
Americans may also need to reconsider what is important to them, that having the latest consumer gadget may not be so significant. "People may have to shop differently and try to find value in relationships and personal activities that do not cost anything," says Richard Sherman, a clinical psychologist in Tarzana, Calif. who works with large companies advising them on downsizing.
People may want to consider a downturn an opportunity to make a career change. Stevens says he is considering living on his retirement money and settling for less income in another profession. "I always wanted to be a teacher," he says.
The Meaning of Money
Psychologists acknowledge that loss of money can be difficult because our society associates love, power and freedom with money. And since people define themselves so much by their jobs, a job loss — or even the fear of losing one's job — can threaten their very sense of identity and self-worth.
James Gottfursht, a psychologist specializing in money and employment issues from Los Angeles, suggests people take small steps to adjust to changing times, cutting back, say, on the number of videos they rent a week or the number of times they eat dinner out. "Smaller losses are easier to face," Gottfursht says.
As people have less, thriftiness will become "chic," as it has in past times, Gottfursht says. "Instead of conversations about spending, discussions might veer towards spending less money on dinners or vacations," he says. "Once people break free of the addiction to money, they realize that they really didn't need it so much."
If you hit a crisis, like losing your job, you will be grateful for re-cultivating your friends and family, who can help you through it. "The worst thing you can do is isolate yourself," says Sherman. "Exercise and eating right is as important now so you don't get depressed."
Keeping perspective also is key. "You may have lost a job, you didn't lose an arm," says Neil Lewis, a psychologist in Marietta, Ga., who advises companies about downsizing.
Lewis advises the recently unemployed to "take stock, take charge and take action": First, look at cash flow. Then, take responsibility, and don't blame others (or yourself) for your situation.
"Instead, they should take action and make looking for a new job, a full-time job," Lewis says. People should talk to friends and associates, and join support groups to talk to others who may be going through the same thing.
Human beings have amazing recuperative powers, and will manage, says Lewis. "Unfortunately, life sometimes is not easy," he adds.
The person who receives a pink slip, however, is not the only one who suffers, the experts say. If a company keeps cutting its staff, those who remain often pick up the additional work to a point of what can be diminishing returns, says Mitchell Marks, a psychologist who specializes in businesses from San Francisco.
"People may be willing to run the treadmill and work hard if there are bonuses and rewards at the end," Marks says. "But for fewer benefits, people may decide to slow down."
With a possibility of increased unemployment, it also becomes difficult for people to find new jobs, should they want to jump ship. Young people used to ever expanding prospects may get resentful.
Managers will have to find ways to motivate remaining employees to increase output if raises and other perks become less likely. "Managers should be proactive and communicate with employees that they may have to work harder now with the hope that prosperity will return and so they do not lose their job," Gottfursht says.
Should sluggishness continue, though, the have-nots may start getting angrier with the haves. "There is a growing divide among the rich and poor," Marks says. "When things are rosier, Middle America didn't begrudge the haves. But in a tightened economy, the middle class may not be able to tolerate the high salaries of CEOs and athletes."
Frank Stevens takes antidepressants and sees a psychologist to help him cope. He is optimistic he will find another job, after being to three job interviews recently. "I am a salesman," Stevens says. "I am not afraid to sell myself about how good a worker I have been … If I could do it for someone else, I could do it for a new employer."