Economists See Rebound, Workers Waiting

In the 10 months since Kathe Cronin was laid off from Sprint Corp., she's come up empty trying to replace the $52,000 salary, three weeks paid vacation and the self-confidence she lost along with the job.

So the cubicle veteran changed course, signing on this fall at a just-hatched subdivision near her home in Harrisonville, Mo., and staking her economic bets on a newly issued real estate license. Still, her first check — no salary, just sales commission — is probably months away.

"As far as the economic recovery for me, I haven't seen it," says Cronin, whose worksite now is a handful of half-built homes edged by cow pasture. "But if I just can just hold on and make it through this crunch …."

Cronin's uncertainty says a lot about the economy and the people who make it work as 2003 nears an end.

After almost three years of painful job cuts, factory closings and thin corporate profits, this was the year the battered economy finally began to come back.

But many of the workers and businesses hit hardest by the downturn can only visualize a rebound. Even some who have seen a pickup in their fortunes remain doubtful about whether the turnaround can sustain itself.

Recovery Not Felt on ‘Main Street’ USA

For scores still out of work, even those looking ahead to a career change, the talk of an economic recovery is as credible as a mirage.

"You've heard the term fuzzy logic? I think that's what we're getting from these economists," says Michael Williams of Portsmouth, N.H., a software developer who has been stringing together contract work since losing his full-time job in March of last year. "And you're getting it from employed economists, not the ones (jobless workers) who have been out there for a while." That perception gap — between the rosy figures that signal a recovery and clouded public sentiment — marks a key juncture in all business cycles, economists say.

But the fact that people remain so uncertain two years after the recession officially ended shows this rebound is still quite fragile, with an upside most people will not see until well into next year.

"You can see the turn in the statistics, but in terms of when it's felt on Main Street, it could be some time," said Anthony Chan, chief economist with Banc One Investment Advisors in Columbus, Ohio.

Extended Job Searches

The rebound is documented in a raft of recent data. After showing modest growth early in the year, the economy raced ahead at an annual rate of 8.2 percent in the third quarter, the fastest pace in nearly two decades.

But while businesses have increased spending on equipment, they remain reluctant to do so on people. For the majority who kept their jobs, that means longer hours and sometimes doing the work of two. Business have held the line on pay raises, trimmed benefits, and left people feeling squeezed.

The key remains new jobs, economists say.

"It's really the rebound in employment that matters for most people. They might be able to see business getting better, but they really feel it when job growth improves," said Richard Berner, chief economist for Morgan Stanley in New York.

The lag was relatively short in most past recessions. But it has stretched out this time, the result of the so-called "jobless recovery," 22 months in which the economy grew even as employment shrank.

That has stretched job searches. About a quarter of those searching for work — 2 million people — have been out of a job longer than six months. The recovery isn't jobless anymore. The economy has regained 328,000 positions in the past four months after shedding 2.7 million during the downturn.

Slowly, more people are getting interviews and offers. Some of the first to benefit are people willing to take temporary jobs, added by companies still unwilling to commit to long-term staffing.

"This upswing in the last couple of months has been steady and strong and across the board," says John Boone, chief executive of Employment Trends, a small temp agency in Beaverton, Ore., that supplies companies including a number of semiconductor plants.

The hours worked by Boone's temps increased by about 40 percent — equal to 134 more full-time positions — from October to November, usually a peak month.

New Reality?

But economists say many of the jobs lost during the downturn won't come back. That reflects what some analysts say was over-hiring by U.S. businesses when times were good, as well permanent changes including the relocation of jobs overseas.

The new reality has begun to sink in this year, spurring many jobless workers to go back to school or shift their focus in a bid to find something new. It hasn't been an easy transition. "I see a lot of older students on campus. I see people in their 50s that are dragging their book bags behind them on wheels. It's really very humbling," says Vicki Wilson, an administrator at Alamance Community College in the textile hub of Burlington, N.C.

Other workers have had to lower their sights, settling for survival jobs at much lower pay. They, too, remain doubtful that a rising economy will lift them off the rocks.

Terry Gaines, for one. Gaines lives in Portland, Ore., which has led all other large cities in unemployment. He became part of the statistics in July 2001 when he lost his job as a software support manager. In theory, Gaines became part of the rebound when he finally found a job this past August as a sales associate at a Saks Fifth Avenue store. But he's making just a third of his previous pay and sees a limited upside, even looking to next year.

"I am very fortunate that I do have a job," he says. But the economy "is not turning around as much for individuals like myself. We are still fighting to make ends meet."

Others have charted a strategy assuming that conditions won't soon improve.

Bob Blair lost his quality control job at an auto parts plant in July. The 53-year-old Blair, who's from Mebane, N.C., between Raleigh and Greensboro, joined the job hunt along with thousands of workers from textile and other plants that have shut across the state.

Blair first looked for a similar job, but got no offers. So he retooled, enrolling in a truck driving course. The idea, he says, was that a company who hired him to drive would realize his other talents and move him to a better job helping run its safety department.

The course finished in October. But Blair, who hasn't yet found a position, is reluctant to look too far ahead. Of the 86 former co-workers who lost their jobs when he did, just two have found comparable work.

"I don't expect anything to hop out and bite me and I don't think the economy is that strong," he says. "No matter what the indicators say, I think the indicators are false."

Economists stand by the numbers, but say the degree of improvement has been so incremental and it is still so early in the process that the benefits have yet to filter down.

"We're seeing all the signs. We just haven't yet crossed that critical threshold at which point we can declare victory," Banc One's Chan says.

When Main Street does finally begin to feel the turnaround, some of the first to notice will probably be the thousands of people who started their own businesses after losing jobs. While most of the ventures remain embryonic, some are starting to gain traction.

Louise Van Osten, a former executive at a consulting firm, is in that camp. Van Osten, of Ramsey, N.J., lost her job in a layoff in mid-2001, and got minimal response to the resumés she sent out. So she poured the past two years into opening and running Foot Solutions, a franchised shoe store a few minutes from her home.

The business has grown gradually. Van Osten hired three employees, the last a year ago, and sales this year grew 20 percent. But with a first-hand opportunity to observe consumers, Van Osten is circumspect about what comes next for her business and the economy.

"I don't see things slipping back again, but I don't expect it to be a big push," says Van Osten, noting that very few of her customers buy more than one pair of shoes at a time. "I think it's going to be gradual … People are going to be conservative for a while." That uncertainty also prevails for many manufacturers. Rich Gentes, a seasoned business owner in Portland, for example, says it could be a year before he hires again even if the economy continues to improve.

By this past July, Gentes had cut the staff at Maxline Custom Cases Inc. from 16 workers to five and borrowed heavily just to keep the doors open.

Then, customers he hadn't heard from in two years began calling the shipping case maker. A month later, the uptick turned into a surge of orders that had Maxline's handful of remaining employees working nights and weekends. But after all his business has weathered — including a slowdown again in November — Gentes is unconvinced the economic rebound has taken hold. "I'm a lot more optimistic than I was, but I still don't know if this is the real thing," he says.

At least Gentes has hard figures on which to base his outlook. For people like Cronin, the aspiring real estate saleswoman, figuring out the future comes down to a hunch. At times she wonders who will buy the homes she's selling unless more companies starts hiring. But that's depressing, so Cronin tries to focus on the positive.

It helps, Cronin says, to drive out to Katy Trails, the hint of a subdivision she's banking on, and imagine how it will look once home buyers arrive — if she can just hold on that long.

"I can see the houses and the neighbors and the swing sets and the whole bit," she says. "I surely want to be there to be a part of it."

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