Boeing bust

Massive cuts at the Lazy B will drive unemployment higher.

THINK THE ECONOMY is bad now? Just wait. The state's alarmingly high unemployment rate of 6.6 percent, the nation's highest, doesn't take into account Boeing's massive job cuts. While thousands of airplane workers have already started getting layoff warning notices, they have a 60-day lead time, so hardly anybody will be off the payroll until Dec. 14.

"That's what's so worrisome," says Roberta Pauer of the state Employment Security Department. "The rest of the economy is in recession, and we haven't even come to the Boeing layoffs yet."

The cuts are, in the words of Boeing spokesperson Thomas Ryan, "dramatic." Blindsided by the airline industry's nosedive after Sept. 11, the company plans to shed up to 30,000 jobs worldwide by the middle of next year. Locally, the downsizing will eliminate as many as 18,000 jobs—almost a quarter of Boeing's workforce in the state. Almost 9,000 of these local workers have already received warning notices so far. The next wave of notices is scheduled for Dec. 21.

Boeing's slump, which comes on top of a general recession, is a big reason our economic downturn will be "deeper and last longer" than the nation's, according to Employment Security's Pauer. When the Boeing job cuts do take effect, the state's unemployment rate is expected to reach 8 percent—"or more," according to Chang Mook Sohn, the state's chief economist. It may take us as long as three years to climb our way back to financial health.

What makes Boeing's cuts even more painful for the local economy than their number alone would indicate are the high salaries workers will be losing. The average Boeing wage is $63,000 a year, almost twice as much as other workers in the state earn on average (not including Microsoft's moneyed minions). The less people are paid, the less consumer spending there is.

Moreover, the latest Boeing bust is simply a shock. "In the past, we saw it coming," says Machinists Union president Mark Blondin. "This one happened so suddenly." The economic slowdown had taken a toll on Boeing and the airline industry before Sept. 11, but profits were still healthy and employment was relatively steady. In fact, Boeing had been recalling workers who had been laid off in previous downsizings, and the company, in its fancy new Chicago headquarters, was crowing about a new global identity. Then the terrorist attacks hit, and within days airline companies announced they were teetering on the brink of bankruptcy, and Boeing reacted accordingly. Some of the workers now being laid off at Boeing, Blondin notes, were recalled to the company just a few months ago.

Still, while this is Boeing's sharpest downsizing in decades, it's worth remembering that we're not in the territory of the company's legendary bust of the late '60s and early '70s. Then, the company nearly shrank by an incredible two-thirds, slashing 64,000 workers locally and 95,000 in all. Some wondered whether the company, facing far greater competition than it does now, was going to disappear entirely.

Nobody wonders that today. After all, now that Boeing has swallowed former competitors including McDonnell Douglas, it is one of just two commercial airplane manufacturers in the world. "People know we will recover," says Charles Bofferding, head of the Seattle Professional Engineering Employees Association at Boeing.

Boeing's growth in defense—partly spurred by the terrorist attacks—as well as in new areas like telecommunications, will help offset losses in commercial aircraft, asserts aerospace analyst Paul Nisbet of JSA Research (though the withdrawal last week of several planned partners from its Internet-access business, Connexion by Boeing, was a blow). He expects Boeing's revenue to drop about 5 percent, to $55 billion, in 2002.

A year or so later, he thinks the company could start to rebound, due partly to the aftereffects of Sept. 11. Currently, the nation's airlines have placed about 20 percent of their planes in the deserts of Arizona, the country's designated parking lot for planes not in use. When airline demand eventually picks up, as seems inevitable, those planes would likely have to be retrofitted in accordance with new federal safety requirements sure to be enacted. It would probably be more efficient to buy new planes, Nisbet says, making it "quite bullish for airplane manufacturers."

Whatever happens with Boeing, it's also important to recognize that the company is an important, but no longer dominant, force in the local economy. When the big bust occurred 30 years ago, Boeing's workforce represented almost 19 percent of the workforce in metropolitan Seattle (King, Snohomish, and Island counties). Today, its share of jobs is just 3.7 percent.

And though salaries are exceptionally high at Boeing, accounting for 7 percent of total salaries paid in metropolitan Seattle, they're not the highest around. Microsoft's—no surprise—are. Including stocks, Microsoft salaries add up to 10 percent of total salaries in metropolitan Seattle, though its share of the workforce is just 1.8 percent.

What would happen if Microsoft took a nosedive too? Better not to think about it.

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