NT Times April 18, 2008 Workers Get Fewer Hours, Deepening the Downturn
By PETER S. GOODMAN <http://topics.nytimes.com/top/reference/timestopics/people/g/peter_s_goodman/index.html?inline=nyt-per> Not long ago, overtime was a regular feature at the Ludowici Roof Tile factory in eastern Ohio. Not anymore. With orders scarce and crates of unsold tiles piling up across the yard, the company has slowed production and cut working hours, sowing worry and thrift among its workers. "We don't just hop in the car and go shopping or get something to eat," said Kim Baker, whose take-home pay at the plant has recently dropped to $450 a week, from more than $600. "You've got to watch everything. If we go to town now, it's for a reason." Throughout the country, businesses grappling with declining fortunes are cutting hours for those on their payrolls. Self-employed people are suffering a drop in demand for their services, like music lessons, catering and management consulting. Growing numbers of people are settling for part-time work out of a failure to secure a full-time position. The gradual erosion of the paycheck has become a stealth force driving the American economic downturn. Most of the attention has focused on the loss of jobs and the risk of layoffs. But the less-noticeable shrinking of hours and pay for millions of workers around the country appears to be a bigger contributor to the decline, which has already spread from housing and finance to other important areas of the economy. While official unemployment has risen only modestly, to 5.1 percent, the reduction of wages and working hours for those still employed has become a primary cause of distress, pushing many more Americans into a downward spiral, economists say. Moreover, this slippage is a critical indicator that the nation may well be on the verge of a recession, if not already in one. Last month, the hours worked by those on American payrolls dropped, compared with six months earlier, according to an index maintained by the Labor Department. The last time the index moved into negative territory was February 2001, when the economy was on the doorstep of recession. A similar slide emerged in August 1990, one month into what proved an even more severe downturn. >From March 2007 to March of this year, the average workweek reported in the >private sector slipped slightly to 33.8 hours, from 33.9 hours, while overtime >for manufacturing workers fell by a larger margin. At the end of last month, more than 4.9 million people were working part time either because they could not find full-time jobs or because their companies had cut hours in the face of slack business, according to a Labor Department survey. That represented an increase of 400,000 since November. And on Wednesday, the government reported that average earnings slipped in March after accounting for the rising costs of food and fuel - the sixth consecutive month that pay failed to keep pace with inflation. As people bring home paychecks that do not go as far, they are forced to economize, eliminating demand for goods and services that once captured their dollars, spreading pain to providers like auto dealers and lawn care providers. They, too, must trim their outlays on pay, shrinking working hours more and furthering the slowdown "It means spending slows going forward," said Robert Barbera, chief economist at the trading and research firm ITG. Paychecks are diminishing just as millions of Americans are finding their access to credit constricted as well. Borrowing against the value of real estate - a crucial artery of household finance in recent years - has been pared back as home prices have plummeted and as banks have tightened lending standards in the aftermath of the collapse of the housing bubble. "At this point, those avenues are blocked," said Jared Bernstein <http://topics.nytimes.com/top/reference/timestopics/people/b/jared_bernstein/index.html?inline=nyt-per> , senior economist at the labor-oriented Economic Policy Institute in Washington. "Consumption going forward is going to be in large part a good old-fashioned function of paychecks and incomes." Even before the rollback in working hours, pay was barely keeping up with the rising costs of gas and food. From February to September of last year, the average hourly earnings for workers in the private sector was still growing at a slightly faster clip than the pace of inflation, according to the Labor Department. But from November through March, as employers began to scale back in a variety of ways, wage growth fell below the pace of inflation, meaning that paychecks were effectively shrinking. Now, work opportunities are themselves declining, as the downturn snuffs out business. In the suburbs of Denver, Max Garcia was netting as much as $2,000 a month last year as a self-employed computer repairman, he said. As recently as November, he was still receiving three and four calls for help a week. But since early February, calls have dropped to one a week or fewer, he said. "Everybody's getting tighter," he said - himself included. With his income cut in half, Mr. Garcia, a single father, no longer takes his two young daughters out for fast food, he said. For clothing, he now goes to secondhand stores instead of the mall. For amusement, he visits the park instead of the museum. "We spend more time at home," Mr. Garcia said. "We don't drive anywhere we don't have to." In Los Angeles, William Righi, a musician, bemoans the sudden difficulty of getting jazz and blues gigs at restaurants and parties. He gives fewer private singing lessons to high school students. "Their parents don't want to pay," Mr. Righi sighed. "They don't have the money to burn. In the last month, it's really dropped off." With his income down, Mr. Righi has been putting off buying new musical instruments and sheet music. He has curtailed his traveling. At a factory in Lancaster, Pa., Armstrong World Industries <http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=AWI> , which makes flooring products, cut production of vinyl sheets for two weeks in March in reaction to softening demand for its goods, the company said. Management is now seeking to slow production further, said Joe Rumberger, president of the local branch of the United Steelworkers, which represents workers there. Some of those sent home received temporary unemployment benefits, he said, securing government checks of about $520 a week in lieu of paychecks that reached $900. "It hurts," he said. "If you're not working, unemployment checks only go so far." At many companies, management is hanging on to as many workers as it can, cutting hours to try to limit layoffs, while hoping that business improves. As the construction business deteriorated rapidly last fall, so did demand for the ceramic tiles produced in New Lexington, Ohio, at the Ludowici factory. In November, the company began drastically cutting overtime for many workers. The following month it laid off several people. Last month, the factory resorted to layoffs, cutting the hourly work force to 81, from 93. It idled the kiln on weekends. But even as sales fell, the company kept producing, building up stocks of tiles that it assumed it could sell eventually. "We thought that would be a smart way to do it in order to keep people working," said Derek Thomas, the plant manager. "The philosophy around here is we remain hopeful that things are going to pick up." But if fresh orders do not arrive soon, Mr. Thomas acknowledged that his hopes were likely to be dashed. In that case, he said, the company was facing further "head count reductions." With his overtime pay gone and faced with the ugly potential of a layoff from the job he has known for 14 years, Mr. Baker, the plant worker, is streamlining his spending every way he can. This time of year, he would normally be planning a trip through Ohio in his camper. But he does not expect to take to the road anytime soon. "Not with the money flowing the way it is," he said, "and the price of gas." To John E. Silvia, chief economist for Wachovia <http://topics.nytimes.com/top/news/business/companies/wachovia_corporation/index.html?inline=nyt-org> , the banking company based in Charlotte, N.C., Mr. Baker and his boss are representative of a national economy that is hunkered down and awaiting better while worrying about worse. "You've got a lot of people sitting around now," he said, "waiting and hoping for orders."
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