Snake-Bitten By a New Economy

Turn the key, crank the engine, listen to this thing rumble.

For a metaphoric look at a meteoric economy, flip to Page B3, and cruise through Eric Evarts's review of the Dodge Viper.

Viper is one red-hot buggy: monster power plant under the hood, six forward speeds, enough horsepower to put a space shuttle in orbit.

Few of us will probably ever own one, but most of us have tagged along for the ride in today's high-octane economy. America enjoys record high employment; well-tuned interest rates; and a stock market that last week set some record highs despite trouble in Asia and weirdness in Washington.

But as you'll see in Shelley Coolidge's story, many of us are getting blown out the exhaust pipe.

Despite an economy in overdrive, corporate America treats employees as if a recession ruled the road.

As Shelley points out, more people got "exhausted" last month than any of the previous 24.

Witness 3,300 workers at Black & Decker. Their company posted $97 million in profits last year, and its stock price this year is up 30 percent.

But the household-products division was deemed a poor performer - especially in Australia and South America - and its workers were laid off.

Welcome to the New Economy. The term usually gets hauled out to describe resilience, but in the land of the new, job security has become a thing of the past.

A lot of this is, well, your fault. The US economy is growing, but not for the usual reasons - the green ones tucked snug in your wallet.

Consumers generally occupy the driver's seat - punching the gas or pushing the brakes. But you've stayed stingy in your spending. The power instead comes from corporate spending on new technology and other productivity boosters.

That means better ways to make products but stiff competition to sell them. The economy lacks the extravagance of a Viper. It's more a sensible sedan.

So when Australia and South America don't pull their weight, jobs vanish.

Ironically, layoffs don't seem to work.

A 10 percent staff reduction cuts costs by only 1.5 percent, finds a 10-year look at 115 companies by the Massachusetts Institute of Technology. Productivity gains proved immeasurable, and only half the companies showed better profits. Average stock prices for downsized companies rose only 3.7 percent over a three-year period, while stock prices for companies not downsized rose 34 percent.

Go figure.

And as awful as the experience is for those pruned by the pink slip, it's no bed of roses for those left behind.

Another new study - by AKM Consulting & Research, Michigan State University, and the University of Southern California - finds that employees become demoralized. Productivity drops.

Managers often become "abrasive ... apathetic, or depressed," and blame themselves for causing harm to others.

But as any manager will tell you, university professors don't enjoy day-to-day contact with the bottom line. When it shows red, pressure builds to do something now, something pink. So don't expect much in the way of change.

* Comments? Send e-mail to: mccormickl@csps.com