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As the epicenter of the auto industry's disaster, Detroit has been struggling with the nation's highest urban unemployment rate: 11.8%. Although its streets are decorated for Christmas, and stores, bars and restaurants are busy, an almost palpable anxiety hovers over the city and its gilded suburbs. For the moment, Motown's local economy has been saved from real damage by a system of auto-industry supplemental unemployment funds that allows most laid-off workers to continue to receive 95% of their base take-home pay; but those funds could run out within six months. Out in suburban Bloomfield Hills and Grosse Pointe, meanwhile, auto executives gloomily ponder the prospect that normally generous year-end bonuses will be painfully thin this year. Says one Ford executive: "If there's no bonus, we'll have to scrape."
Detroit's city government is already scraping. A rise in crime is putting added burdens on the police force, while greater demands are being made for social services. Yet the rash of layoffs is expected to carve at least $10 million in city tax revenues out of the municipal budget, and Mayor Coleman A. Young worries that Detroit may have to ask for outside aid. Says he: "Our city's problems are only a harbinger of what the nation will soon be facing."
Some other cities are learning to cope with unemployment at or close to 10%; among them are San Diego, hit hard by the collapse in construction; and Elkhart, Ind., whose mobile-home manufacturing industry has slowed down sharply. While New York City agonizes over its 7.4% unemployment, Seattle is content with its 6.9% because 15% of its aircraft-centered labor force was out of work in the 1969-70 recession. Chicago and Cleveland, both diversified with several still healthy industries, including steel and heavy machinery, are skating by the slump with less than 5% joblessness—though even in Chicago, unemployment-compensation offices have been jammed lately.
White-collar employees are finding the current recession particularly unnerving, because companies are no longer as reluctant as they once were to furlough them. Chrysler has laid off 20,000 clerks, accountants and lower-level managers; Sears has let more than 200 executives and middle-management workers go in the past several weeks. Many big corporate employers have quietly frozen new hiring and are trying to whittle their staffs through attrition. At the same tune, employees are less eager to reach for early retirement at a tune of soaring inflation. The Chicago office of the Booz Allen executive recruiting firm has been receiving close to 400 unsolicited letters from job seekers each week, up from about 125 a week in less jittery times.
Having learned a lesson from previous recessions, employers have been hanging on to machinists, welders, engineers, chemists, metallurgists and others with hard-to-come-by skills that they will need when business picks up again. But unskilled youths find job prospects so poor that they are joining the Army in greater numbers than expected, quieting the Pentagon's fears of last year that the ranks could not be filled once the draft ended. Recruitment rose 3,100 over forecasts during the fall, and would-be enlistees are flocking in so fast that the Army is raising its acceptance standards.