Consumer Frustration Grows During Listless Recovery : Economy: In Philadelphia, as in many hard-hit areas, layoffs and cutbacks are mounting. Few believe that a turnaround is at hand.

Dennis Weit just lost his job as a machinist here, and it couldn’t have come at a worse time: His wife Jeniffer is expecting their first child in February. Now, both Weits are working at a sandwich shop, but together they are making less than Dennis did before.

John Powell, an operating engineer for a harbor dredging company, was laid off three months ago and worries that the economy seems to be getting worse. “If I don’t get something in the next month or six weeks, I’ll really be hurting,” Powell said with a sigh.

Charles Weihe lost his job as a truck driver here less than two months ago--the first time he’s been laid off in 21 years. “This recession just hit me seven weeks ago,” Weihe said.

Such stories are becoming more commonplace these days as evidence grows that the heralded economic recovery--whose arrival was hailed with fanfare last spring by President Bush and Federal Reserve Chairman Alan Greenspan--apparently has fizzled out.

A recent survey by regional Federal Reserve banks shows that the economy is either stagnating or has begun to weaken further in virtually every section of the country. California has been especially hard hit, the Fed says.

To be sure, economists are still divided over where the economy is headed. Some believe it is on the verge of teetering back into a recession. Others insist that the recovery is continuing--barely breathing--with nearly invisible growth.

But one thing is certain that was not clear even a few weeks ago: With the 1992 presidential campaign just getting under way, Washington’s often-insulated economic policy-makers are beginning to recognize that the slump is still on.

In fact, the economy may prove to be a crucial issue in the presidential race. Polls show heavy voter discontent with Bush’s economic policies, and a worried Administration is scrambling to find a way to deal with the situation.

On Friday, Democratic leaders, sensing an opportunity to make hay on the issue, vowed to revive their jobless benefits bill and to continue to pressure Bush on the broad issue of “tax-fairness” for the middle class.

But, as Washington wrangles over policy and politics, the rest of the country is still feeling the effects of the continuing weakness in the economy--and there is no convincing most people that a recovery is under way.

In big cities and small towns alike, the talk is of fresh layoffs and wage cutbacks, of unsold homes and unaffordable new cars, of weak consumer spending and an absence of confidence, and, above all, of the worsening financial squeeze facing the American middle class.

“It is pretty clear that people are holding off on purchases, because they are not getting jobs, or their employers are putting their raises on hold,” said Steve Cochrane, an economist with the WEFA Group, an economic forecasting firm here.

“There is a real lack of confidence among people that they are going to be able to keep up with inflation,” Cochrane contended.

Virtually all of the factors now holding the American economy in check are on display here in Philadelphia.

The area, a major beneficiary of Pentagon spending in the past, is being hit hard by defense spending cutbacks.

The huge Philadelphia Navy Yard, which employs more than 16,000, has been slated for closure, while General Electric, the area’s largest private employer, has announced plans to cut more than 3,000 jobs in its high-tech defense facilities here.

In addition, large, non-defense manufacturers and service firms in the region have announced major job cuts in recent months, underscoring the impression that the recovery has missed the region entirely.

Unemployment in the Philadelphia metropolitan area rose in August to 6.7%--more than two full percentage points higher than the 4.3% rate that was posted just as the recession began in August, 1990.

Meanwhile, the rocky fiscal outlook for state and local governments, which has hurt the economy’s potential for expansion nationally, has hit Philadelphia harder than almost any other big city this year.

In fact, the city is in its worst fiscal crisis ever and has only narrowly averted bankruptcy. Although Philadelphia already has one of the highest tax rates of any city, residents now face a possible tax hike and more government layoffs after Tuesday’s mayoral election.

Pennsylvania has also hiked state taxes in order to narrow a record budget deficit.

Continuing news about layoffs, tax hikes and deficits have all kept consumers on the sidelines here.

“The average household has seen the news about more layoffs, and has seen home prices continue to fall,” said Joel Naroff, chief economist at First Fidelity Bank Corp. in Philadelphia.

“They are worried about their job and about the value of the wealth they have saved in their homes,” he said. “And, when you are worried about both of those, you are not going to spend money, no matter how low interest rates are.”

Consumers here agree that they are becoming more and more conservative with their money as they feel less secure about their jobs.

“Business isn’t picking up--they just laid off five people at my company,” said Carmen Panichelli, a Philadelphia ironworker. “So nobody is touching their money.”

As a result, businesses that rely on consumer spending have yet to see a recovery. “We’re not out of the woods yet,” said Kerry Pacifico, an auto dealer. “We are really cutting prices . . . but our sales are now actually lower than they were six months ago.”

James Clearkin, owner of a large Philadelphia construction firm, agreed. “I don’t see any forward motion, we are just at a standstill,” he said. “I would say that our business in September was even worse than it was a year ago.”

The weak consumer sector is having a broader impact on the business community: Companies are borrowing less, as worried corporate executives delay new investment projects.

“We clearly do not see the loan demand that we had in the past,” said Dottie Motz, chief lending officer for Core States Bank, the city’s largest bank. A recent informal survey of 30 of Core States’ corporate customers found that 27 of them believe the recession has not ended.

Now, with few signs of a turnaround in the offing, the frustration and restlessness among average consumers with Washington’s policies seem to be mounting here.

“The situation is really serious, and I think Bush is just a fat cat who isn’t doing anything,” Mel Sterling, a wholesale food salesman, complained. “People haven’t been listening to all this rhetoric from Bush that the economy is improving. People know better.”

How bad it will get is open to question. Most economists agree that it is still too early to tell precisely where the economy is heading. The economic statistics are sending mixed signals.

Technically, the recession ended in the third quarter of this year; the government said last week that the nation’s output of goods and services in the third quarter rose at an annual rate of 2.4%, ending a string of three straight quarterly declines.

“Our indicators are not in recession, but they are showing we are not going anywhere either,” said William Dunkleberg, chief economist of the National Federation of Independent Businesses, a trade group for small businesses.

But, even as the upbeat figures were being released, the warning signs of a renewed slump were mounting.

Consumer confidence plunged in October to recessionary levels, home sales fell sharply, factory orders declined for the second straight month and the national unemployment rate edged up--to 6.8%, from 6.7% in September.

The report of higher joblessness was “devastating news for American workers,” said Sen. Paul S. Sarbanes (D-Md.), chairman of the Joint Economic Committee, on Friday. “The employment figures strongly suggest that the economy is heading back into recession.”