First the Merger, Then the Job Cuts

THE merger-acquisition fervor of the past decade has led to some layoffs of workers within the United States - particularly among professionals at the managerial level and among highly paid skilled workers within the manufacturing sector. But are those layoffs widespread enough to have a national impact, hurting house sales in upscale communities, cutting into the business of those retailing to high-income customers?

``We are definitely starting to see examples of job losses because of mergers,'' says a member of an economic ``response team'' that studies the impact of plant closings and other structural changes pertaining to corporations. The official is with New Jersey's Department of Labor, based in Trenton.

``There is a clear linkage between mergers and layoffs,'' says the official. ``We've noticed that once the merger occurs, some departments in the acquired firm are very quickly done away with, such as the accounting department. Many of these people [whose jobs are lost] tend to be professionals or from middle-management posts.''

But economists are uncertain whether there are enough data to measure any connection between mergers and poor business for what used to be called the carriage trade. Indeed, little actual research has been undertaken on the subject since the ``merger fervor'' of the mid-1980s, according to labor economists. More statistics are being gathered throughout the US as a result of the 1988 enactment of the federal plant-closing law, which requires medium-size or larger companies to provide employees with 60 days notification of plant closings under certain conditions.

Still, anecdotal evidence is piling up of job losses resulting from mergers and hostile takeovers. Many companies have cut work forces to boost profit margins - and in the process avoid a takeover. In the consumer-goods/ grocery sector, where mergers and consolidations have become commonplace, in recent years, job losses have been far from unusual. Sometimes entire chains have disappeared, as happened in late 1986 when thousands of workers at Gemco, a discount store in California, suddenly found themselves out of work following a hostile takeover.

Is there a linkage between rising real estate inventories in affluent cities such as Wellesley, Mass., and merger-related layoffs among high-paid professionals?

Inventories of unsold houses are unusually high in many well-off suburban communities, particularly along the Eastern Seaboard.

IN Wellesley, between 190 and 200 houses are on the market, awaiting buyers, according to Donna Hegarty, an associate with WellesleyWest Real Estate, Inc. The total, she says, is definitely ``a bit higher than normal'' at this time of the year, reflecting in part high real estate prices and a slowing state economy.

``I think that with so many mergers under way, there's a lot more caution among the `almost-ready-to-make-it crowd,''' says Clair Asklund, an economist with DRI-McGraw Hill, an economic consulting firm based in Lexington, Mass. ``These are people who have been on the upward-mobility fast track. But because of mergers and acquisitions they now realize that there's not as much access to senior management positions. So there would probably be a greater hesitancy about spending beyond their means'' and buying a house in an expensive community, Mr. Asklund says.

The national unemployment numbers do not suggest any massive layoffs triggered by mergers, says Jim Markey, an economist with the Bureau of Labor Statistics in Washington. The overall civilian jobless rate for June was 5.3 percent, up only slightly from the 5.2 percent jobless rate in May. (July statistics come out today.)

Nor do figures for white males over 20 seem unusual. This is the group that would presumably be most hit by any joblessness resulting from mergers and acquisitions. For this segment of the labor pool, the unemployment rate has tended to stay fairly consistent of late. In February, the rate was 3.8 percent; in March, 3.6 percent; in April, 4.0 percent; in May 3.6 percent; in June, 3.7 percent.

However, if job losses from mergers are significant, it could be somewhat hidden in the totals, says Mr. Markey.

The pool of people in executive and managerial positions, he says, is relatively small - only about 14.2 million workers out of the 115 million people who were in the total labor market in 1988. Thus, he says, only about 1 in 10 workers falls into this category. Assuming that some executives within this segment were unemployed because of a merger, it ``would be very difficult to quickly pinpoint them,'' Markey says.