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US slump leaves new poor in shell-shock

(Filed: 23/08/2001)

Philip Delves Broughton reports from an affluent yet jittery corner of Middle America

SOMERSET County, New Jersey, is the richest county - in terms of personal income - in the richest state in America.

Leafy roads wind past large houses, and the car park of the local YMCA is packed with Jeeps, Saabs and Volvos.

Inside, 25 recently sacked or "retired" executives have gathered to learn how to find a job in an increasingly bleak economy.

Russell Potter, a management consultant, tells the career forum support group in Basking Ridge: "All jobs are temporary. Loyalty doesn't last and isn't there anymore. You've always got to be ready to bail out."

Everyone nods, yet the lesson is coming too late for many. While the White House puts a brave face on the American economy, a raft of evidence points to a much longer slump than anyone imagined.

The fall from boom to bust has been faster than any since the 1973 oil crisis, say some economic analysts, and the chorus calling it a recession is gaining voice.

After a decade of explosive growth, people have been reluctant to accept that the good times are over.

When technology stocks began their free fall 16 months ago, pundits cheerfully predicted an early rebound.

Instead, what has followed has been continuing economic gloom. Stock-heavy pension funds have dropped in value, forcing many to postpone retirement.

Company profits are hurtling downhill, personal debt is rising and jobs have been cut at a rate of more than 100,000 a month all this year.

Many now believe that the economy has run off a cliff and, like a cartoon character, is frozen in mid-air, leaving people terrified of an impending fall.

Joy Montgomery, 50, a marketing consultant and single mother from Basking Ridge said: "You've got people round here who have worked their whole life. Suddenly they're out of work. A lot of people are shell-shocked right now."

At the big local employers, including the telecommunications companies Lucent and Avaya, hundreds of people have been sacked or have taken early retirement in the past few weeks.

By the end of the year, Lucent hopes to have slashed its workforce from 155,000 12 months ago to 60,000.

Disclosures about Lucent's boom-time excesses have stoked local anger. Last month, the firm said it was selling two golf courses it had bought for executives, as well as a £14 million corporate jet. Those who never enjoyed the perks - and are now jobless - are furious.

Anne Mellen, a technology specialist who has taken the firm's early retirement package said: "There's a lot of hostility about this."

All across the American landscape, there are signs of a slump, which the more formal economic statistics have yet to register.

The number of CVs posted on Monster.com, a popular job-seekers' website, has risen from four million in January to 11 million.

Restaurants and airlines are suffering their worst slowdown since the 1990-91 recession. Many of those who experienced that slump are now better prepared financially.

Lloyd Feinstein, a career counsellor in Basking Ridge said: "People are coming off 10 good years. People have more resources. They can go without a pay cheque longer."

But among younger people, getting their first taste of economic gloom - and, especially, the poor - there are high levels of debt.

US consumers are taking twice as much debt into this slump - $7.3 trillion dollars (£5.1 trillion) by the Federal Reserve's estimate - as they did in the last recession.

In previous decades, slack in the domestic economy would be picked up by a boom somewhere else in the world.

But this time round, the whole world seems to be slumping together - a consequence, say some economists, of the increasingly integrated global economy.

"On balance, I'd say that the likelihood of continued difficulties here and abroad is higher than the prevailing view of most economists," Robert Rubin, the former US Treasury Secretary, said this week. Those on the front line in places such as Basking Ridge would agree.

-- Anonymous, August 22, 2001