Stateline Story

Tracking the Recession: How Layoffs Affect One Small Town

The unemployment rate in South Dakota remains below the national average, though both the U.S. and South Dakota employment rates have gone up 68 percent between February 2008 and February 2009

Dec. 9 began like any other Tuesday for Connie Schlim. She and her husband, Clyde Schlim, reported to work at 5 a.m. at Scotchman Industries , a small manufacturing company in Philip, S.D.

Five minutes later, a supervisor told Connie Schlim that Dec. 9 would be her last day at Scotchman after 11 years. Clyde Schlim, 59, whose only job after high school had been at Scotchman, was let go a month later, though he left with an early-retirement package.

Connie Schlim, 52, was one of the 524,000 Americans who lost their jobs in December. She represents a miniscule fraction of that total, but her story shows that behind the numbers are the faces of real people in places like Philip, which has about 800 residents. Some are going through more pain than others, but all share the experience of a boss telling them they are a casualty of what could be the worst recession since World War II.

Today, three months later, Connie Schlim is collecting $260 a week in unemployment benefits and looking for work to replace the $12.50-an-hour job she had changing parts on a milling machine. But like many victims of this recession, Schlim says she feels trapped because there are no other jobs available nearby and no new employers coming to Philip. Other than the local hospital, Scotchman is the largest employer in Philip, with 72 people after the cutbacks. The Schlims are resigned to stay in Philip but say they will cut back on expenses.

"Our golden years won't be as golden as we had planned on," said Schlim, who has two grown daughters.

In past recessions, people like the Schlims could have considered moving to another state that was adding jobs. If you lost your job in South Dakota, you might have found work in California. But the downturn that began in December 2007 is notable for its depth and breadth. Every state has been hit.

"There is no refuge," said Mark Zandi, chief economist at Moodys.com . "If you lose your job, there's no place to go."

The remaining 72 people at Scotchman Industries are so determined to stay and work in Philip that they told the owner, Jerry Kroetch, they would agree to work fewer hours instead of see any more of their co-workers lose their jobs. The nearest cities, Rapid City and Pierre, are about 85 miles away, but it's not as if jobs are plentiful in those cities, especially in manufacturing.

Sanmina-SCI, an electronics manufacturing company, will shutter its Rapid City plant in June, severing 275 jobs. Hutchinson Technology, another electronics company, cut 275 employees at its Sioux Falls plant in January. In Mitchell, 188 miles east of Philip, Trail King Industries, which makes heavy-haul trailers, has laid off 117 workers since December.

Scotchman's 12 dismissed employees may seem like a small number by comparison. The same week of the Scotchman layoffs, about 20 major U.S. companies, including Bank of America, Dow Chemical, Office Depot and the National Football League, slashed more than 80,000 jobs as they tried to trim costs before the end of the year.

But 12 high-wage jobs represents 3 percent of the jobs in Philip, or the equivalent of 4,000 layoffs in Sioux Falls, South Dakota's largest city. "Proportionately, it's bound to have a big impact" on a town of 800 residents, said Raymond Ring , an economics professor at the University of South Dakota. It means fewer gallons of gasoline sold at the gas station, a smaller tab at the grocery store and less frequent trips to the hairdresser.

A quick calculation by John Sondey , an economics professor at South Dakota State, shows the 12 workers probably spent about 80 percent of their paychecks, or a total of about $4,800 a week for the 12. Not all of that will disappear from the local economy, however, because the workers will be getting unemployment benefits for six months or longer. "It's not a knock-out punch" to the local economy, Sondey said of the layoffs.

There's also a social cost to losing your job, as the Schlims have found when they show up around Philip. "It's different in a small town," said Kroetch, referring to his laid-off employees at Scotchman. "They are personal friends, not just employees."

In fact, South Dakota isn't so big either. "We all know everybody," said the state's labor secretary, Pam Roberts . "I know people who work at Scotchman. It's one degree of separation in South Dakota, not six."

Roberts stressed that South Dakota is in a better position than most states, with a 4.6 percent unemployment rate compared to 8.1 percent nationally in February . The rising rate in South Dakota is driven by the decline in manufacturing, which mirrors the national picture. Many states, especially in the Midwest, have managed to keep their unemployment rate relatively low compared to other states. South Dakota has actually added some jobs in health care and education.

But all states have been slammed by the decline in manufacturing. Orders for Scotchman's machines have fallen so sharply that Kroetch did not want to provide the numbers because he feared that another company could gain a competitive edge.

Connie Schlim, laid off for the first time in her life, said she and her husband will manage. It helps that they bought their 28-acre place from her parents. They had a lot of bills to pay and had expected to take care of them by working until they reached retirement age. "I don't think we'll ever recover," she says.

The Schlims still go to Scotchman to visit the other workers, who also are their neighbors and friends. It feels odd not going to work every day, says Connie Schlim, and it's not like they can avoid the place; Scotchman is a two-minute drive from their house.

"When we go up there, the others say, 'If things don't change with this economy, I'll be in line right behind you,'" she said.