“We have hit bottom and are on the upswing.”
- James J. Davis, Secretary of Labor.
September 12th, 1930
You often hear that the Great Depression was not so bad if you had a job. That is probably of little humor to the millions of people who are currently unemployed. The sad fact is that despite seeing positive GDP growth and a rebound in corporate profits, the labor market “recovery” has been nothing other than painful. After over two years we are still 5 1/2% in the jobs hole, or worse than the peak of the 1948 recession.
What is disheartening is not just that this job recovery has been so terrible, but that job recoveries in general have gotten slower. If you follow the different recovery paths, you see the turning point later and later in the recovery cycle. The key question is whether the slow jobs recovery has to do with the depth of the recession, the length of unemployment benefits, the cautious outlook by corporations (cyclical demand), or whether there has been a structural shift in the US labor markets. My bet is that the vast majority of the problem has to do with a structural shift. The jobs lost in commercial and private real estate are not coming back anytime soon and the homebuilders seem to know it. Where do the individuals who are unemployed and used to work in construction turn? Many manufacturing jobs have already moved overseas and many more in the automotive industry have been hacked as well. It certainly makes you wonder if at some point we made a wrong turn. With such a large budget deficit, trade deficit, and unemployed workforce it is hard to see that we have set our country up for success.
Let us all hope that innovation sparks the re-purposing of this economy, otherwise we might just give way to the European model of socialist stagnation and entitlement.