From his perch atop Red Mountain, Vulcan the Iron Man, named for the Roman god of the forge, still watches over the city he has symbolized for generations. But the Birmingham he stands for is vanishing.

Until recently, Vulcan was Birmingham. Iron and steel, furnace and foundry, pipe and rail, all were the essence of life here, the foundation of the vast industrial community that earned Birmingham its title of Pittsburgh of the South.

Then, at the end of June, United States Steel Corp., the giant of the industry, linchpin of Birmingham's economy for much of this century, closed the last production facility at its mammoth Fairfield works. Big Steel, which once employed about 25,000 workers here, sent home the last 3,000 and shut down the furnaces that once blackened the sky for miles around.

Birmingham, like the nation itself, is going through a rite of passage that is transforming the community.

Just beneath the surface of American society, two powerful, growing currents are on the move, tearing down, rebuilding and utterly changing the world of work.

From one direction, computers, industrial robots, office automation and other products of a technological explosion are transforming the nature of jobs.

Lunch-bucket, factory America is disappearing rapidly, giving way to an economy increasingly dominated by high-technology and service jobs. Not since industry supplanted agriculture more than a century ago has there been such a change in the work place.

At the same time, massive shifts in the makeup of the working population are occurring. The baby boom generation, born in the 20 years after World War II, is almost entirely in the work force. Now the number of young people reaching working age is declining sharply.

The work force is becoming older, more female, less urban and less northern. Minority groups with traditionally high unemployment rates will comprise a disproportionately large part of new job seekers.

If the experts' worst fears come true, these two forces will produce painful mismatches in the kinds of skills that large numbers of Americans bring to the economy and the kinds of skills the economy requires, swelling the numbers of the unemployed and the underemployed.

In Birmingham, with each passing month, fewer and fewer people are earning their living in the steel and iron mills that built the city. More and more are employed in education, services, transportation, electronics and the other new industries that are supplanting the grimy, gritty blue-collar factories of the past.

The Birmingham metropolitan area, which has a population of 850,000, lost 10,000 manufacturing jobs in the 1970s, most of them in the blast furnaces of a declining steel industry.

In the first two years of this decade, more manufacturing jobs have vanished as U.S. Steel shut down and the Pullman-Standard rail car plant in Bessemer was closed. But in the same period the area has added more than 100,000 non-manufacturing jobs.

These new jobs are in insurance, government, retail trade, transportation and government and medical research and education. The University of Alabama in Birmingham and its medical school are now the area's biggest employer.

The shutdown of U.S. Steel, which once would have bankrupted and demoralized all of Birmingham, caused hardly a ripple in the handsome new "office parks" and orderly, planned communities that have sprung up to the city's south and east.

Across the nation, jobs in services and finance now outnumber those in the production of goods, such as manufacturing, mining and agriculture.

"We are probably in the midst of a work revolution that will equal the great change that moved us from a primarily agricultural society to a primarily production-based society," said Richard Balzer of the polling firm Yankelovich, Skelly & Wright. "More and more, working with one's head is replacing working with one's hands."

Today, Westinghouse Corp., a diversified manufacturer, describes half of its employes as "white collar," a ratio that is true of the nation's entire work force.

Birmingham reflects that trend. Manufacturing and mining employed 30.5 percent of the work force in 1970, and 21.6 percent last year, according to the Alabama Department of Industrial Relations. With the closing of U.S. Steel and inevitable impact on local suppliers that is soon to follow, the change is likely to accelerate, business and labor leaders here say.

As a result, unemployment and despair are running high in the western end of Birmingham and the neighboring communities of Fairfield and Bessemer, where the steel mills and pipe foundries no longer have jobs for unskilled workers.

But at the university campus, at the hospitals and in the new commercial and retail centers at the other end of the county, the job market is growing for those with the skills to move into it.

"The raw materials needed by services are not the same as those needed by steel," said J. Dudley Pewitt, vice president for administration of the University of Alabama in Birmingham (UAB).

"When you came over that mountain 25 years ago, the sky was dark. The white collars on schoolgirls' dresses were dirty before they got to school. Now we're strong in insurance and engineering. We've had a continual upgrading of educational skills. The power base has shifted."

Pewitt's institution, a sprawling campus that covers 62 blocks near downtown Birmingham, now has 8,400 full-time workers, many of them professionals in medicine and engineering who hold jobs for which displaced steel workers could never qualify.

Pewitt is president-elect of the Birmingham Area Chamber of Commerce, voice of the economic power structure here, reflecting UAB's dominant position.

"The university is now the mainstay of the regional economy," observed Robert C. Douglass Jr., the chamber's research director. "Steel isn't the whole story. We hate to lose those jobs, we feel it, but it's a much more diversified economy now."

In fact, according to state and federal statistics, Birmingham, with its new jobs in the university, the southeast regional headquarters of the Social Security Administation, a coliseum and convention center, insurance and real estate, now has a smaller percentage of its work force in manufacturing than does the nation as a whole, a transformation that has shocked the blue-collar communities of the steel belt.

"We were dependent as hell on U.S. Steel for a long time. They ran this city. They kept other industry out by controlling the labor pool," said Barney Weeks, president of the AFL-CIO's Alabama Labor Council.

"They employed a lot of blue-collar people who can't work on computers and aren't medical people," he said, referring to the thousands of factory hands for whom there are no opportunities in the new Birmingham economy.

In theory, Weeks said, displaced workers could be retrained, or could study some new skill at the state-funded university, but it is not practicable because federal job-training funds have dried up and many blue-collar workers are not prepared for other kinds of jobs.

"A man who does repetitive work in a plant for 25 years is not accustomed to dealing with the public," Weeks said. "He can't sell. His whole life has dulled the kind of skills those jobs require."

He said he was not optimistic about the prospects of the workers who lost their jobs in the decline of the region's steel-related industries or in Alabama's hard-hit textile and forest-product industries.

Unemployment in the Birmingham area was below the national average for most of the 1970s, but by mid-May, even before the U.S. Steel shutdown, the rate was up to 11.7 percent, well above the 9.5 percent nationwide figure. The joblessness is concentrated in west Birmingham and the adjacent suburbs, where the steel and pipe mills are.

Johnny Nichols, 60, the mayor of Fairfield, was a 39-year employe at the steel plant until he was cut from the payroll last month. His son, he said, was laid off from the steel mill three years ago, and is now working at less than half his old salary as a maintenance man in an apartment building.

"Over the mountain, in the new suburbs, it doesn't affect them so much," Nichols said. "But the western end of the county is hard hit. For the people who have just a high school education, who aren't engineers, there's just no place to go."

In the past, he said, the young people of Fairfield and Bessemer and Hueytown and Pleasant Grove went directly from high school to the factories, where they could make a good living. Now, he said, "They have to leave here, and even if they go away they might not find a job."

The university may make it possible for some young high school graduates to learn the skills that will get them into the new jobs downtown and "over the mountain," he said, but "the vast majority of people looking for work are not skilled. We got over 100 applications for a city laborer's job that pays $5.20 an hour. We finally stopped taking applications."

Birmingham's once-mighty iron and steel industry is not entirely a thing of the past. About 27,000 workers are still employed in the pipe foundries and iron works here, and U.S. Steel is constructing a $650 million seamless pipe mill that is scheduled to open in 1984.

It is even possible, though unlikely, that some parts of the sprawling old Fairfield works will reopen or that the Pullman-Standard plant will be resuscitated, business sources here say.

The long-term trend, however, is away from the factory-floor jobs that supported this community for decades and into the new high-skill service economy that is developing in Birmingham as it has in Boston, Dallas, Cleveland and other big cities. U.S. Steel's Fairfield works, empty, silent, and overgrown with weeds, looks more like a museum of the past than a resource for the future.

U.S. Steel's role in the area's economy had been diminishing for years, and business leaders here say the community began preparing at least a decade ago for the day when steel no longer would support Birmingham.

"What happened at U.S. Steel was anticipated," said Roy W. Gilbert Jr., chairman of Birmingham Trust National Bank. "People here broadened their markets, they sought sales in Mississippi and Florida. We made ourselves into a transportation and warehousing hub. A lot of investment was stimulated by the growth of the university. The engineering school and the hospital and medical school brought in competent, highly sought-after individuals."

With no big military bases in the area to shore up the economy, little tourism, poor air service to New York and Chicago and an unhappy civil rights record that it has found hard to live down, Birmingham had heavy liabilities to overcome as it sought to free itself from dependence on steel.

But the overnight growth of the university and the selection of the city as the headquarters for South Central Bell Telephone Co. when it was set up in the late 1960s provided anchors for the development of a diversified economy.

The result is an economy that offers opportunities for engineers, health care workers and freight traffic managers, but little for the devotees of Vulcan.