Where Do They Go from Here?

By Janice Castro

-- For her talent in teaching social studies, Cathy Nelson, 37, was named Minnesota's Teacher of the Year last October. But she is not teaching anyone right now, because she lost her job in a budget cutback.

-- After 21 years with Quaker Oats, Mike Krause, 50, was running the European operations of the company's Fisher-Price toy subsidiary when Quaker decided to sell the business last spring. Krause, one of 1,300 employees whose jobs were eliminated, has been looking for work ever since.

-- Tommy Darnell, 29, was a skilled sheet-metal cutter at General Dynamics until he was laid off last month along with 3,500 other Fort Worth workers. Says he: "I guess I might have to write off 10 years of experience."

Since last August, more than 800,000 Americans, from steelworkers and autoworkers to clerks and bankers, have lost their jobs in the most serious burst of unemployment since the 1982 recession. During January alone, as business braced against the harrowing uncertainties of a recession overlaid with war, 232,000 people lost their jobs. The government reported last week that January's jobless rate rose to 6.2%, up from 6.1% the previous month and 5.3% in June. All told, 7.7 million Americans were unemployed in January. % "The job loss last month was immense," says Allen Sinai, chief economist for the Boston Co. Economic Advisors. "The findings really blow out of the sky any notion of a short and shallow recession."

Among the hardest hit workers have been those in manufacturing, where 454,000 jobs have been lost since last August, and construction, which has declined by 362,000. In the auto industry, 19 of the Big Three's 51 U.S. assembly plants are temporarily closed. Altogether, 65,000 auto jobs have disappeared. Almost the only part of the economy to escape the pain of the recession is the health-care industry. During the past year nearly 600,000 health-care jobs have been created, bringing total industry employment to 8.4 million.

If there is any good news, it is that the harshest phase of the layoffs may be over. Companies have reacted to this downturn more swiftly than usual with deep pre-emptive cuts. Still, economists expect that as many as 1 million more Americans may lose their jobs before the recession's effects fade next fall -- and that forecast assumes that the war ends within a few months. The Commerce Department reported a seeming indicator of strength in the economy last week, announcing that orders for durable goods climbed 4.4% during December. But only limited segments of the economy benefited, since considerably more than half the increase was attributable to orders for military goods.

Even if the recession is relatively brief, many workers will be hard pressed to find jobs anytime soon. Well before the U.S. slipped into recession last fall, business was downshifting in the wake of the Reagan expansion. Corporations were eliminating slices of middle management and the layers of clerical and professional staff supporting them. Says Roland Stichweh, a senior partner at the Towers, Perrin, Forster & Crosby benefits-consulting firm: "Organizations under stress are finding that they must abandon their traditional sense of loyalty to these employees."

At the same time, companies have been replacing many of the stars who led them during the boom years with more conservative managers. Says Paul Ray Jr., an executive recruiter: "Instead of doing deals, now the emphasis is on cost control." On Wall Street during the past two years, more than 60,000 jobs have been lost as merger mania ended and the bull market stalled. Largely as a result, big accounting and law firms that served the merger makers have slashed their partnership rolls. Last month the accounting firm Peat Marwick abruptly dismissed 300 of its 1,875 partners, protecting profits by chopping highly compensated senior talent.

While losing a job is always a wrenching experience, most senior managers can count on reasonable severance as well as personal savings to cushion the blow. But for legions of workers whose prospects of finding a place in a shrinking job market are bleak, the money is fast running out. More than 2.2 million people used up all six months' worth of unemployment benefits last year, a 16% increase from a year earlier. Worse still, a study released in December by Mathematica Policy Research, a consulting firm, found that 60% of unemployed workers were in the desperate position of still being jobless 10 weeks after their benefits expired.

In several past recessions, Congress and the states responded to widespread joblessness by allocating extra money to unemployment trusts so they could extend worker benefits for a few additional months. But during the past few years the Federal Government and the states have tightened eligibility for such benefits. Only Alaska and Rhode Island are currently expanding the assistance. And with everything from the gulf war to the savings and loan bailout competing for scarce federal funds, Congress is not eager to press such a move. For the moment, once they exhaust the standard benefits period, the jobless are on their own.

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With reporting by Gisela Bolte/Washington and Deborah Fowler/Houston