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The Jobless Recovery in Perspective



“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.

Where is the jobs recovery?

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.

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4 Responses

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  1. jb says

    As far as jobs go there are two important points (IMHO):
    a) outsourcing and globalization has led to shifting of certain jobs overseas. Not without benefit though. I would not say that it is not a net +ve to all countries involved. But, I think there should be policies to handle the associated labor shift. I’m not sure what they would be but surplus/deficit imbalances cannot last for too long, for example. Some US workers are open to working in other countries and learning about other countries and cultures. I believe this could also be the structural shift that you are talking about.
    b) the unemployment rate for anyone with atleast a bachelor’s degree in the US is 4%. It is unacceptable for the foremost developed country to have large sections of its population be without a minimum level of education and for education to be as expensive as it is. I don’t want to over-emphasize education – it might actually be reasonable to argue that not everyone needs to have a bachelor’s degree and many school drop outs achieve a lot, but there is something here that could be done perhaps?

    In effect the two points above are demanding a higher and higher expectation from the US labor force – they need to be better educated and more open and flexible as globalization trends change. That is difficult to do and has deep negative social impacts.

    Additionally, the US needs a vision and a push towards a new technology or exports (to growing emerging markets) or infrastructure upgrade cycle to maintain better levels of employment. The export part I am actually optimistic about (in the longer term) because US firms are well positions to take advantage of global distribution chains, etc.

  2. jb says

    One other thing, I have noticed that various stimulus efforts in the US end up stimulating overseas companies. I have noticed outsourcing IT companies lauding the healthcare bill, for example, which is fine if their share is a reasonable amount – these companies are now hiring in the US as well. But, it would be interesting to find out how much of the US stimulus ends up stimulating the ex-US world economy!

  3. IHS says

    Look at all the buzz about Apple’s revenue and earnings. I read that 25,000 people work for Apple in the US, while 250,000 assemble Apple products in China. Same holds true for Intel, with most of their demand and revenue coming from Asia. If you’re an investor you’d look for a large company that is a global enterprise, with low cost of production and a worldwide market. Only the great companies will succeed. There is austerity in most countries, especially Europe, and all countries are trying to innovate and export. The bottom line is that the prospects for the US unemployed/underemployed and uneducated workers are not bright.

    If you’re an investor you can survive by finding stable global companies that pay dividends above the 10-year Treasury rate. Nobody talks about it but financial preferred stocks and exchange traded debt have been great opportunities the past 18 months. I would not be looking for the next Apple or Google. I also would not buy either at current prices.

  4. slacker says

    Awesome read , I am going to spend more time learning about this topic



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