Jobless Figures Don’t Always Tell True Story : In Complex Economy, ‘Full Employment’ Is Relative

An Orange County-based restaurant chain opens up a cooking school for the chronically unemployed to make sure its kitchens stay fully staffed. In Bedford, Mass., a high-tech firm offers cash bonuses to workers who lure new talent onto the payroll. And in northern Virginia, a defense research company--hard-pressed to find typists--uses high school students.

After hovering stubbornly at 7% or more throughout the 1980s, unemployment has dropped sharply in most of the nation this year. In June, it reached 6.1%, a level that some economists say is almost the best that can be achieved in the United States without igniting inflation. Two out of three adults are in the work force, a historic peak. “We may very well be close to full employment in a number of areas,” economist A. Gary Shilling said.

Happy news? Not for everybody. In the huge, complex U.S. economy, even a simple-sounding term like “full employment” is not so simple. The numbers provide little cheer to millions of people who have either given up looking for jobs or who cannot get full-time work. Despite the above portraits from booming regions, parts of the country suffer hard times even in the fifth year of an economic recovery. And minorities continue to endure painful levels of joblessness.

Idyllic State Impossible

“Some people would say we already have more than ‘full employment,’ ” said Sar Levitan, director of the Center for Social Policy at George Washington University. “But if you look, you see that 10 states have unemployment that’s 8% or higher--which is a recession level.”

Let’s define our terms: When economists talk about full employment, they do not mean an idyllic state of affairs in which every adult is gainfully employed. That’s impossible.

Some unemployment is natural as people quit jobs in order to move or to switch careers. Changes in the makeup of society cause joblessness, too. The younger the work force, for example, the greater the number of workers who are unsettled in life and, therefore, drifting in and out of jobs.

By full employment, economists usually mean a situation in which so many people are employed that further increases will spark an inflationary wage-price spiral as companies bid up the wages for hard-to-find labor.

In light of the experience this year, with monthly unemployment rates dropping from 6.7% in January to 6.1% in June, “additional job gains are likely to raise wage-inflation pressures dramatically,” said John Hagens, an economist with Wharton Econometrics. “The surprise to us is how fast unemployment has come down,” he added.

Already, prosperous parts of the East and West coasts offer glimpses of a fully employed world. Such places seem to have more discouraged employers--unable to hire all the qualified help they need--than discouraged workers, the term used to describe those who have given up on finding a job.

Started Training Program

The situation hits home at Denny’s Restaurants, an Orange County-based firm with more than 50,500 employees nationally. Stephen F. Joyce, a senior vice president, said the problem is felt most in Southern California, the East Coast--from Washington through New England--and southern Florida.

In one dramatic response, Denny’s, with the help of local business leaders, recently began a special program of training chronically unemployed people as cooks in Riverside County. The reason goes beyond altruism: “The motivation for Denny’s,” Joyce said, “is to keep Denny’s supplied with people.”

In Orange County, Denny’s cooks earn $5 to $6.50 an hour, compared to rates as low as $3.65 in parts of the Midwest.

During the past 12 months, the tight supply of workers has helped push average wages at Denny’s up 7%--more in certain areas--despite national inflation of well below 5% for most of the period.

“There’s something across the country that’s forcing wages up--and it’s not the CPI (consumer price index),” Joyce said. “It’s the (scarce) availability of labor.”

In Bedford, Mass., Millipore Corp., which makes instruments to separate fluids, finds engineers and scientists so valuable that it offers bonuses--of up to $1,000 in some cases--to any of its own employees who help recruit them. In addition, it relies on temporary personnel agencies to meet its need for secretaries and clerical help. “We’re feeling the pressure,” said Jeff Gard, the firm’s manager of corporate human resources. “It’s more difficult to find the right talent.”

In neighboring Connecticut, a McDonald’s restaurant buses in workers from the Bronx to meet its 24-hour staffing needs. Other fast-food restaurants have responded to the dwindling supply of teen-age help by encouraging retirees to come back to work.

“In areas of the country where there’s extremely low unemployment, everybody has to be a little more creative,” said Lana Ehrsam, manager of media relations for McDonald’s Corp. in Oak Brook, Ill.

Forced to Boost Pay

Diane Godding, human resources director at the BDM Corp., a defense-oriented research firm in McLean, Va., said the tightening market last year forced the firm to boost all its pay ranges 10%, although it had had no plans to do so.

In addition, the company uses high school students, college students and temporary workers to meet its need for typists. “You can run an ad for a job opening and get no calls at all,” Godding lamented.

The state of affairs has obvious advantages for those who seek work. But policy-makers long have squabbled over the point at which a robust rate of employment turns into a troublesome scarcity of labor.

In the early 1960s, 4% unemployment was the target. The entry of the postwar baby boom generation into the work force changed everything, however. Starting about a quarter of a century ago, the size of the teen-age work force began to soar and did not peak until the late 1970s, when it totaled 17 million.

Many of the young people had trouble finding their niches in the working world, despite a dramatic expansion of service employment, including jobs in offices, retail stores and restaurants. As a result, most economists concluded by the 1970s that 6% or 7% unemployment reflected a realistic full-employment level for so young a population.

Now, of course, the baby boomers are getting older--and the 16- to 19-year-old population group has been shrinking in size. Many economists say the country can handle 5% to 6% unemployment without setting off inflation these days. “We’re certainly moving toward full employment,” said David Wyss, an economist with the consulting firm of Data Resources in Lexington, Mass. “But how far we’ve got to go until we hit it is still in question.”

The debate endures because many see the issue as one of basic fairness. While the pain of inflation is spread throughout society, unemployment has devastating effects--but on a smaller group.

“The public is willing to tolerate high levels of unemployment, as long as they themselves aren’t personally threatened,” Barry Bosworth, an economist at the Brookings Institution in Washington, said.

Accuracy Questioned

Moreover, the most commonly cited government estimates, based on a monthly survey of 60,000 households, give the impression that the problem is smaller than it is. People who are unemployed--but have not looked for a job in four weeks--are not reflected in these figures, for example. Labor Department officials estimate that 1 million individuals are in this group.

Those who wish to work full time but get work only part of the time represent another dilemma. About 5.2 million people working fewer than 35 hours a week fall into this group of involuntary part-timers, according to the Bureau of Labor Statistics. “You can make a case that we have more unemployment,” said Levitan of George Washington University. “And you can make a case that we have less unemployment.”

One thing for sure is that today’s high employment is not enjoyed equally by population groups or regions. Blacks, for example, registered 12.7% unemployment in June, more than double the 5.2% rate for whites. Black teen-agers endured 33% unemployment--which may sound shockingly high but actually was lower than their 39% unemployment rate for much of the past year.

“Six percent is good news for economists--but it ignores the millions of people who haven’t seen the benefit yet of a full-time job at a decent wage,” said Calvin H. George, executive director of the liberal National Committee for Full Employment, which pegs the level of joblessness and underemployment at more than 11%.

Wide Range of Rates

Areas dependent on energy or on industries hurt by foreign competition have been pounded with special force. Oil-producing Louisiana, for example, suffers 11.2% unemployment, followed by Alaska--with a similar dependence on energy--at 11.1%. By contrast, 10 states had rates of 4% or less, led by New Hampshire with a microscopic 2.4% and Delaware with 2.8%. California had a lower-than-average 5.6%.

These disparities are a problem for those who make national policy. The whopping federal budget deficit and the reality that much of the country is enjoying strong employment growth both stand in the way of new government spending programs.

And an alternative to such efforts--pumping up the money supply to stimulate business activity--could inflate the whole economy. “It would heat up Orange County and Boston--and not do anything for those folks in Colorado and Wyoming,” warned Jerry Jordan, chief economist at Los Angeles’ First Interstate Bancorp.

Nonetheless, many experts argue that even today’s limited unemployment demands a solution: “I don’t think it (6.1%) is good enough,” said Robert Eisner, a professor at Northwestern University and president-elect of the American Economic Assn. “There isn’t any reason why we shouldn’t be able to get close to 4% again.”