(FORTUNE Magazine) – TOM BROWN, 44, had been working as New York regional comptroller for McKesson, the big wholesale drug distributor, when he got the news that he no longer had a job. He knew that layoffs were inevitable, but he still thinks he should have been treated better after 13 years with the company. ''Management didn't want to talk to me after my position had been eliminated,'' he says. ''They basically didn't want to know that I existed.'' Terry Cantine, 49, was product marketing manager for a Sun Valley, California, company called AVX Filters when she got the ax last September. She's been brushing up on her computer skills, and she tells prospective employers she's willing to take a big pay cut, but nothing has turned up yet. Says Cantine: ''My life was my job, but now I'm finding out how wrong that is.'' James Kmetz was laid off last April after four years as a trust specialist at Norwest Corp. in Minneapolis. He received a one-minute outplacement interview and no severance, and he has grown weary of hearing that his education and experience make him overqualified for the menial jobs he applies for. Says Kmetz, 46: ''I have no career aspirations. I don't want to move up. At my age, I'm not very hopeful about finding another good job. For me, the American Dream is dead.''

You cannot miss the pain in these voices as a new generation of unemployed Americans describes the savage realities of today's job market. Pain compounded by shock -- for these are typically the kinds of people who didn't lose jobs in past recessions. And the economy they've been thrown into is something their experience never prepared them for. Any way you look at it, unemployment just isn't what it used to be. In particular, this downturn has been much tougher than past ones on older workers, who often have a harder time finding a new job, and on white-collar workers, who have long considered themselves immune to the harsh effects of business cycles. Compared with the recessions of the 1970s, this one has hit with layoffs about double the proportion of workers ages 35 to 54 and of white-collar types. Jobs have usually come back strong after past recessions. But this time unemployment remains stubbornly high, at over nine million people, or more than 7% of the work force, even after some signs of strengthening job growth in January. A startling number of recent layoffs appear to be permanent. Only 15% of workers recently laid off expect to return to the same job, says the Bureau of Labor Statistics. During the previous four recessions, an average of 44% of laid-off workers expected to be recalled. The real employment picture is probably darker than these figures suggest. More than six million people are working part time because they can't find a full-time job, figures the BLS, and another million or so have simply given up looking for work. That means nearly 17 million people, or almost 12% of the labor force, are unemployed or underemployed. Unaccustomed to joblessness, many of the new unemployed believe that retraining will land them a new position. It might -- but often they train for jobs that aren't out there. The new jobless reasonably look to small companies for employment -- these enterprises were the main engine of job growth in the Eighties -- only to find the engine largely shut down since the recession. The few jobs available are often a disappointment to the displaced managers competing for them. Most of the action lately has been in low-pay, low-perk service jobs; during a recent month an astounding 118,000 of the 126,000 jobs created were in the retail and service sectors. Only about half the laid-off workers who have found new jobs during this recovery are matching their previous pay. The near future looks pretty grim as well. Big corporations have been whacking away big time over the past few weeks: Sears has cut 50,000 jobs, IBM has lopped off another 25,000, Boeing announced a 20,000 cut, United Technologies called for 10,500 new firings, McDonnell Douglas announced another 8,700, and Eastman Kodak fired 2,000. The bloodletting will likely continue. A survey by management consulting firm Kepner-Tregoe finds that downsizing has become a kind of ''management addiction'' at many big companies. Top brass at more than a third of the corporations that had downsized in the previous five years expected to lop heads again within 12 months. Defense cutbacks will add to the losses for years to come; the total of jobs eliminated in that sector could be as high as 2.6 million by 1997. Adding fuel to the firings is the familiar trend away from hierarchical, vertically integrated corporations to leaner, more flexible organizations that outsource many functions and add temporary employees for particular projects -- the so-called modular corporations. Multiplied thousands of times, this phenomenon adds up to a profound structural change in the U.S. labor market. ONE HEARS that being fired has lost its stigma, since most people are beginning to recognize the change -- it happens to everybody nowadays, right? Perhaps, but it still packs a wallop. Mike Meyers, 55, was a department head at Electrospace Systems, a division of Chrysler Technologies in Crystal City, Virginia, until he was laid off last June. He had been on the job for 11 years, since shortly after he retired from the Navy, and he's still trying to cope with the wrenching change in his life. ''I'm pretty discouraged at the moment,'' he says. ''Even the physical act of getting a resume together has been tougher than I anticipated.'' Meyers concedes that defense contractors like the one he worked for are in tough shape, but he's still bitter about the way he was treated. Says Meyers: ''I asked for outplacement, and they didn't even respond to my request. I network, I call everyone I once knew as a business contact. I tell you, friendly people are not that friendly when you're out of a job.'' For many of the newly unemployed, the loss of a job also means a diminished sense of self-worth and the loss of support and stimulus provided by colleagues. Ronald Spangler, 42, was laid off from a managerial job in Philadelphia city government just before Christmas. He recalls, with venom, feeling like an outsider when he attended holiday parties. ''If you tell people you've been laid off, they start to pity you,'' he says. ''You get treated like a nonperson, a nonentity. One of the gauges of who you are is your job.'' Personal problems such as alcoholism and depression are common among the newly unemployed, and marriages are often strained. ''Being unemployed is a full-time job,'' says Edoardo Leoncavallo, 56, a hotel architect formerly employed by Walt Disney Imagineering in Glendale, California. ''There's a lot of stress to deal with, including family stress. I think my wife initially felt resentment. I think she felt, Why can't you bring home the bacon?'' Many of the new unemployed are experienced workers -- and practically novice job seekers. The first time Spangler hit the unemployment office, the place shut down for lunch after he had waited hours to get his claim processed. Bill Thompson, 55, has been looking for work for nearly two years, ever since he lost his electrical engineering job with Control Data in Minneapolis. He has come to loathe the seemingly endless minuet he must dance with prospective employers. ''What's lacking is the mechanism for finding a job,'' he says. ''I mean, the job interview is something short of a farce -- all they are doing is hiring the better actor.'' For many workers the shock of unemployment is compounded by the realization that no employer wants the skills they have developed over the years. Sometimes the problem is advancing technology. John Mazur, a 50-year-old sheet metal worker from Queens, New York, saw his work hours recede steadily last year because machines have replaced most men in the plants that turn out ductwork. Says he: ''Now ten men can produce as much as 60 to 100 men did 30 years ago, when I got into the business.'' Millions of other workers find that their job experience has made them too specialized to entice a new employer. Nick Nguyen, 26, was laid off from his job in computer support at United Way in Alexandria, Virginia, last year after a much-ballyhooed management scandal sliced into revenues at the charity. Since he had been using specially designed software for highly specific tasks, his skills are not easily transferable. Nguyen has been trying to retrain by learning big software packages like Windows and Lotus, but he has been stumped on the job trail. Says he: ''I'd rather not relocate, but I will if I have to . . . I'm starting to think I'll take anything I can get.'' The growing army of so-called discouraged workers, those who have simply given up after looking months or years for decent work, illustrates an important way the job market has changed. At this stage in past economic recoveries, the number of such dropouts would usually have declined sharply as they reconnected with the system. But this time the official number of discouraged workers has held steady at slightly over one million -- and few experts doubt that the true number could be considerably higher. The ranks of the discouraged are loaded with older workers, especially those past 55. According to a survey conducted by the Commonwealth Fund, a New York research group, at least two million older workers are ready and able to work but cannot find jobs. Many were swept up in the early-retirement programs in vogue at major corporations; a recent Conference Board survey of 400 big companies found about 40% offering packages to early retirees as part of downsizing efforts. The big problem, say human-resources experts who counsel older workers, is that many of these folks were financially and psychologically unprepared for retirement. Says Michael C. Barth, senior vice president at ICF Inc., a Washington, D.C., human-resources consulting firm: ''Somewhere about 18 to 24 months down the line, they often discover two things. First, they need money. Second, they are bored out of their skulls.'' Yet many see no way back into the work force because companies have shut their doors to older workers. Gregory Genco, 54, of New York City has worked as an office manager and head administrator at several law firms, yet he has all but lost hope of finding another job. ''Why should they hire me when they can get someone in their 20s for half the price?'' he asks. ''At my age I'd say my chances are pretty close to nil.'' Rosaleen Fettig, 55, lost her production line job at Briggs & Stratton in Milwaukee last April and ran right into apparent age discrimination. She was filling out a job application at a prospective employer's plant when the boss spotted her. The receptionist went into his office to arrange an interview for her. Recalls Fettig: ''When she came out, her face was just red. And she said, 'Oh, I'm sorry, I didn't know the job has already been filled.' '' Advocates for older workers say that attitude is not just cruel but also downright stupid. The Conference Board study found that companies continue to lay off and package out senior workers even though they are more reliable than younger employees, have better work attitudes, have better job skills, are absent less often, and are less likely to quit. About 70% of the companies surveyed also said older workers were at least as cost effective as their younger colleagues. Concludes the Conference Board: ''The effect of current practices and trends may be eroding a valued resource to a degree that is unintended and imprudent.'' Two other recent studies conducted by the Commonwealth Fund dramatically point up just how unwise it may be to shun employees who show a bit of gray hair. The first, which compared older and younger employees working as telephone reservation clerks for Days Inn from 1987 through 1990, found that the older workers were just as efficient as their younger colleagues, cost less to recruit and train, and were far more likely to put up with the demands of the job. After the first year only 29.9% of the youngsters were still around, vs. 87.3% of the employees over 50. Even the seniors' health care costs were about the same as the younger workers'; the authors of the study suggest that's because older workers still on the job rank above average in health and tend to have fewer dependents. In the second study, from 1988 to 1991, a large hardware chain staffed one of its stores solely with employees over 50 and compared its results with those of five stores with younger employees. Again, the older workers were far more likely to stay on the job; the turnover rate was five times higher at the comparison stores. In productivity measured by sales vs. labor costs, the post-50s soundly thrashed two of the other stores and held their own with the other three. Overall, the store staffed by the over-50 employees was about 18% more profitable than the other five and nearly 9% more profitable than the companywide average. Top managers at the chain were so impressed with the results of the experiment that they plan to staff two more stores solely with over-50 workers and step up recruitment of older workers for the chain. AS MONTHS PASS and rejections mount, many of the new unemployed cast about for fresh ways to plug back into the system. One popular strategy is to take courses to sharpen business skills or retrain for a new career. In a survey of 376 unemployed executives conducted by the New York City outplacement firm Lee Hecht Harrison, 90% said they needed to upgrade their abilities -- particularly communications skills -- before hitting the interview circuit. Ex-accountants are looking into the health care field. Bankers are taking education courses in the hope of becoming teachers. After he was laid off from ! an administrative job in technical support at Alliant Techsystems in Minneapolis, Harold Smith, 50, took a job-placement test that indicated he might be suited for sales. Now he is an independent sales rep, offering financial products for Primerica. Says he: ''I don't ever want to get laid off again. I want to control my own destiny.'' Lori Bielinski, a 30-year-old data specialist from Seattle slated for a layoff next June, is using retraining money from US West, her current employer, to become a massage therapist. The problem with this flurry of education and retraining is that it is too seldom geared to the needs of a specific employer or job, so workers may not be gathering the skills companies are looking for. As Janet Norwood, a senior research fellow at the Urban Institute, puts it, ''We simply have not done a very good job in focusing on relevant training. There is a lack of connectedness between business and the education process.'' Like past recessions, this one has not beaten up on each part of the country with equal ferocity, so many thousands of workers each month pull up stakes and relocate on the theory that the employment will be greener somewhere else. Over 1.3 million unemployed people in search of work moved to another state during the 1980s, says the BLS, and the trend seems to have accelerated recently. The tactic improves the odds a little: About 17% more relocated workers land jobs than those who stay home. The problem is that many of the jobs now to be had are mere stopgaps. Job hunters, white collar and blue collar, increasingly face options far inferior to the situations they have left -- low pay, no benefits, temporary or part-time work. Leslie Goldberg, 45, of Los Angeles considered herself lucky to find a new job in her field, employee training and human resources, after a year of looking -- but she had to swallow a $10,000 pay cut. Shirley Martin, 52, of Maryville, Tennessee, had been working at a Levi Strauss plant for 11 years when her shop was shut down. ''They said that workers' comp was costing too much, and that's why they closed the plant,'' she says. ''In reality, they moved our work overseas.'' Martin found a job in a smaller sewing factory after about two years, but her pay dropped from $8 an hour to $4.25. She was recently laid off from that job as well. Says Martin: ''It seems like you're always starting over -- from the bottom.'' This sort of experience has become so common among the new unemployed that labor experts have begun to suggest that rethinking the nation's job-creation machinery may be necessary. Studies in the 1980s acclaimed small businesses as the mighty generators of job growth. Declared President Reagan in 1985: ''We have lived through the age of industry and the age of the giant corporation. But I believe that this is the age of the entrepreneur.'' A year later U.S. Chamber of Commerce President Richard Lesher asserted, ''Small business is America's ace in the hole.'' But for employees this golden age of entrepreneurship is not an unalloyed blessing. James L. Medoff, a professor of economics at Harvard, points out that small businesses, those with 500 or fewer employees, have such a high failure rate that the new jobs they create may not last long. His research shows that 40% of 80 million jobs in the Small Business Administration database in 1980 had disappeared six years later. Small companies usually don't pay as well; big ones beat them by about 30% on average. A few factors account for most of that difference. Larger companies tend to hire more skilled and experienced workers, who can demand a higher wage. More big companies are unionized, and others pay better than small companies to avoid unionization. But after adjusting for these factors you still come up with a 10% differential based on sheer size, and it applies across industries and regions. The disparity between big and small companies is even greater when it comes to benefits. A study conducted for the Small Business Administration found that every large company surveyed offered a health insurance plan; only 55% of the small businesses did. About 94% of the biggies offered life insurance, vs. just 29% of the small guys. Three out of four of the large companies offered a benefits package that included paid vacation, sick leave, and some kind of pension or retirement plan, while a measly 7% of the smaller firms had comparable packages. This is one area of business where economies of scale still operate: Big companies can offer more benefits for less cost per employee. Other studies show that employees at larger companies receive considerably more training than those at smaller companies, that big-company workers are less likely to quit their jobs voluntarily, and that they are more likely to have received varied work experiences on the job. Because of the political power small businesses wield in Washington, they are often exempt from federal regulations regarding treatment of workers. For example, at least half the people employed in the U.S. -- those at smaller companies -- will not benefit from the recently enacted family-leave bill. ALL THIS reflects the hard fact that jobs are not a product of the economy, but a byproduct. They derive from the process of wealth creation, and when a company is creating lots of wealth, as many of today's giants were in the Sixties and Seventies, it can ladle out pay and benefits to its workers, as those companies did. But when outfits like GM and IBM are using up wealth rather than creating it, and when they are based on business models of previous decades, rich jobs look like relics. They aren't. The relics are those companies and their ways of operating, which will be changed or be replaced by companies that have figured out new ways to create lots of wealth. That is cold comfort to the new unemployed, many of whom have skills and attitudes formed in an earlier era. Yet some labor experts have spotted a semblance of a silver lining in the current gloom. Audrey Freedman, president of the New York consulting firm Manpower Plus, says that with so many businesses looking for temporary, or ''contingent,'' employees, workers have far more opportunity to try on different hats and find the best match for their skills and interests. Once they have looked beyond the narrow boundaries of their former roles, says Freedman, a lot of folks may find they are much happier doing something entirely different. The advertising executive who spent every spare moment puttering around the house may wind up more fulfilled as a general contractor. The human-resources executive may discover she has a natural talent for sales. The group vice president who was a weekend gourmand may find he was born to run a restaurant. Says Freedman: ''People have hobbies and skills they don't yet realize can be channeled into productive work.'' At least some of the unemployed report unexpected insights from stepping off the corporate carousel. They have learned the folly of blind loyalty to an employer and the importance of self-reliance, they say. They vow they will approach their next job as an opportunity for personal development. Matching skills and interests. Self-realization. Personal development. It all sounds so exciting, and may even be so. But how many of the new unemployed would happily have forgone such opportunities?

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART SOURCE: ISSUES IN LABOR STATISTICS, USBLS SOURCE: JOINT ECONOMIC COMMITTEE CAPTION: HOPE IS LOW. . . AS JOBS DON'T COME BACK

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART SOURCE: U.S. BUREAU OF LABOR STATISTICS SOURCE: PROFESSOR JAMES MEDOFF, HARVARD UNIVERSITY CAPTION: JOBLESSNESS RISING. . . WHITE-COLLARS HIT HARDER. . . THE OLDER FARE WORSE