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Labor Market Takes Toll on Industrial Towns

Pablo Garcia describes himself as a hard worker and has the broad shoulders and thickly muscled arms to prove it. But like so many people in this timeworn former mill town, he's been involuntarily idle for months.

"There's a lot of people looking for work. They're in the same situation I am," Garcia says. "I've been looking everywhere. It doesn't matter the salary. I just want a job."

If the worst of the recession is past, as many economists believe, you'd never know it by looking at the labor market. The unemployment rate in this working-class city on the banks of the Merrimack River is 16.6%, up sharply from 7.7% in the fall of 2007 and well above the national rate of 9.5%.

The situation in Lawrence may be especially acute, but it's not unique. From battered auto towns in the Midwest to California communities reeling from the housing industry's collapse, American workers today face the toughest labor market in decades. Unemployment rates are in double digits in 14 states, almost twice as many as one year ago. For every scarce "help-wanted" sign, there are nearly six available workers, according to Labor Department statistics.

"It's a desperate scene out there," says economist Heidi Shierholz of the Economic Policy Institute, a labor-funded think tank in Washington, D.C.

It's going to get worse. The national unemployment rate is headed to 10% this year, President Obama conceded last month, and it may test the post-World War II peak of 10.8% set in 1982. Even once the economy begins expanding again - which most economists expect to be before the end of this year - job growth is expected to lag for "at least another year," Shierholz says.

The Federal Reserve, which has been comparatively optimistic in its forecasts, says unemployment will remain above 9% through 2010 and will take "at least five or six years" before settling at the sustainable long-term average near 5%.

"The unemployment rate is the ultimate caboose of economic indicators," says Stuart Hoffman, chief economist of PNC Financial Services Group in Pittsburgh.

The waiting game

The industrial revolution blossomed in the mid-19th century in Massachusetts mill towns such as Holyoke, Lowell and Lawrence. Handsome five- and six-story brick mills hugging the Merrimack River, which once housed thousands of Irish and German immigrants, are a reminder of the city's former commercial prominence.

The local textile industry jobs fled south in the 1950s, when employers discovered the attractions of less-expensive, non-union labor. Ever since, the city has battled to find a foothold in a swiftly changing economy.

"Lawrence was built to be a factory town. Every conceivable square inch had working-class housing and mills. There are thousands of Lawrence-type communities around the country that had their historical wealth generated in industries or a set of skills that were specific to one place," says Robert Forrant, an economic historian at the University of Massachusetts-Lowell.

Today, signs of sporadic renewal war with evidence of continued decay. The spiffy Riverwalk development houses a health care provider, credit union and restaurant company in a converted mill complex immediately adjacent to an interstate highway.

On the other side of town, set against a working-class milieu of corner markets and storefronts, the E.F. O'Leary Bridge is a rutted moonscape of axle-swallowing potholes.

But if the city's physical appearance remains a work-in-progress, its workers are undeniably suffering. Employment here never really recovered from the 2001 recession, which included among its casualties a Lucent factory that employed about 12,000 people. Today, the region's battered workers can't seem to catch a break. Amid the worst financial crisis since the 1930s, the IRS office in neighboring Andover is letting go about 1,400 workers. The General Motors and Chrysler bankruptcy filings mean the closure of two local car dealers.

Communities such as Lawrence are grappling with the pervasive, lingering joblessness that economists say lies in the nation's future. Already, the percentage of the U.S. labor force that has been unemployed for more than six months is near an all-time high.

Likewise, in Lawrence, and nationally, the downturn is hammering some categories of workers harder than others. Especially hard hit here are Hispanics and those with limited skills or formal education. Even when jobs are created here, local residents usually are not the ones hired.

Garcia, 61, lost his $8.50-an-hour laboring job before Thanksgiving when his employer, Ideal Box, moved some of its gift-box production to China. His limited English, age and lack of specialized skills make him a tough sell to employers who can pick and choose from among an army of the unemployed.

Since being laid off, Garcia has dutifully made the rounds of the area's surviving factories and temporary agencies. He leaves his name and telephone number, but so far it's all just wasted effort.

"I'm still waiting," he says.

The worst of times

A native of the Dominican Republic who became a U.S. citizen last year, Garcia is a casualty of an economy that, while no longer in free fall, is sputtering at historically low levels. In May, U.S. factories operated at just 65% of their capacity, the lowest rate since 1948, when the Federal Reserve began tracking the figure.

"This is the worst I've ever seen," says Arthur Chilingirian, 56, executive director of the ValleyWorks Career Center, who has counseled the jobless of the Merrimack Valley for more than three decades.

Located in a renovated brick mill, the center is one of 37 similar offices in the state that provide everything from unemployment insurance and résumé help to job training. The office gets about 80% of its funding from the state and federal governments, including about $3.7 million from this year's fiscal stimulus program. On a recent weekday, Garcia was among about a dozen people using the computer lab to study English.

Demand for the center's services started surging last fall as the financial crisis revved. Some days, the line outside the front door would start forming at 6 a.m., two hours before the office opened.

Among those thronging the center were Rafael Soto, 29, and Tamara Laposta, 35, a husband and wife who had lost their office jobs that spring when the pottery maker they worked for moved overseas.

Several hundred résumés later, Soto and Laposta are convinced they'll never find good jobs again without college degrees. So both have enrolled in classes at Northern Essex Community College. Soto, who was a district supervisor, and Laposta, who worked as a customer-service manager, will graduate next year.

To the young couple, the local labor market feels like a giant squeeze play. On one side are young, fresh-from-college workers willing to work for less than they will. On another side are workers with more experience, who've been jobless for so long they're willing to let go of their former six-figure salaries. In the middle: Soto and Laposta, the parents of 5-year-old Nicolas, are struggling to rebuild their shattered finances.

When both worked, they shared a combined annual income of nearly $100,000. Now, their pooled unemployment checks total less than half that amount, $46,000. Federal trade adjustment assistance, designed to help workers who lose their jobs because of foreign competition, covers their schooling. But $30,000 in credit card debt they accumulated during the boom years pushed them into a downward spiral, which ended in a Chapter 7 bankruptcy filing.

"It was an unfortunate thing. We made a few wrong choices in life and then the economy on top of it," says Laposta, her voice trailing off.

The bank has foreclosed on their home, though they have three months remaining until they have to move. The credit cards are long gone, and they've sold their Jeep and their Chrysler 300 sedan in favor of a 1992 Honda Civic with 160,000 miles on it. They realize that they have a long climb back to financial security. "As sad as it sounds, it's a new beginning," says Laposta, struggling to remain upbeat.

Square pegs, round holes

Even with economic conditions as bad as they are today, some companies are hiring. Mayor Michael Sullivan says the city has enjoyed robust job growth the past four years, especially involving health care and some of the businesses in the Riverwalk development. Likewise, Raytheon, a military contractor based in nearby Waltham, boasts a steady demand for engineers.

The problem - for Lawrence's swelling ranks of jobless men and women - is that the new jobs being created are a poor fit with what they can offer. Those employers largely aren't hiring local residents, who often lack the college degrees or advanced skills required. "It comes down to the labor skills of the people. If you don't have the skills to work and compete, these companies aren't going to hire you," says Sullivan.

For years, this decade's residential and commercial construction boom masked those shortcomings. Many workers with limited skills, including newly arrived immigrants, were able to find work courtesy of temporary agencies or "labor-leasing" bureaus, says Andrew Sum, director of the Center for Labor Market Studies at Northeastern University. Now, as the economy undergoes a wrenching post-bubble transformation, demand for workers is falling in the sectors where many Lawrence workers can participate and shifting to industries where they're overmatched.

Laposta, meanwhile, clings to her dream of opening a little breakfast place some day. But the short-term outlook, amid this punishing economic crisis, is "very bleak," she says, seated alongside her husband in a conference room at the job counseling center.

"It's hit all ages, all races. You see everyone here. You get the sense of despair," she says. "It just seems so much worse here."

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