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The Economy Is Improving…So Where Are The Jobs?

17 February 2011 8 Comments

If the unemployment situation in this country were a cyclical issue (which most people assume) than jobs would be being created left and right at this point.  We’d be well on our way back towards a more normal and acceptable unemployment level.  Unfortunately, this isn’t happening.  Despite an “improving economy” as we’re told.

Now I would still debate the level of improvement in the economy – because I think there are two economies.  One for big business and one for small business.  Big business that has access to cheap/free money and global markets is hitting record profits right now.  Small business on the other hand is still struggling.  Regardless, neither big or small business is hiring new people at a high rate.  Why?

Because the unemployment issue isn’t cyclical.  If it were cyclical, all we would need to do is lower rates, print some money, and get the economy moving again.  We did that and the jobs still aren’t coming, which shows this isn’t a cyclical problem, and thus the cyclical solutions were not the right solutions.

The unemployment situation is structural.  We have major structural issues that won’t be addressed by trying to move the cyclical nature of the economy.

What are the structural issues?

  1. Demographics – The baby boomers are moving towards retirement.  They are moving towards cutting back rather than increasing consumption.  Many of these boomers don’t have enough for retirement as is.
  2. A shrinking labor force – Each month when we get an updated unemployment rate (which is useless and manipulated) we learn of the many people that have just dropped out of the labor force whether it’s due to discouragement or age.  The reality is that there are an increasing number of workers that simply aren’t employable anymore.  Picture the 55 year old worker with an outdated skill set.
  3. Erosion of Manufacturing – The productive jobs that make something tangible in this country continue to be lost and shipped overseas to cheaper labor.  We’ve replaced these jobs with service jobs.  This reflects the consumer-oriented nature of our economy rather than our productive/expert-driven nature of it.  This needs to change.

So, what are the answers?  Well, not printing a bunch of money for one.  The current responses are incorrect and will end up hurting us more than helping us.

The solutions need to be to incentivize job creation, innovation and the creation of manufacturing businesses in the United States.  Why not offer zero corporate income tax for five or ten years for any business that creates a manufacturing plant and hires 100 workers.  Government needs to realize that they won’t create the solutions, but by getting out of the way and offering to get out of the way even more as various incentives, this can work.

So, if you’re happy with Fortune 500 CEOs and Wall Street traders raking in billions in the new economy while main street continues to struggle, then you should be fine with the current path of economic leadership.  If you think this is a joke, then you need to realize that the solutions being implemented are a response to a cyclical downturn, not structural economic ills.  We need new plans and new solutions.

8 Comments »

  • TaJ said:

    The whole discussion is all pretty meaningless when you get down to it. The list of prerequisites necessary for growth, each of them politically impossible to achieve, is pretty enormous.

    Though I agree with one thing – not printing infinite piles of money in order to prop up insolvent banks would certainly be a nice start.

  • Matt said:

    Interesting post.

    You hear the phrase "hitting the reset button" often in reference to the current economic climate which insinuates a cycle. Although, that perspective applies to some elements in the economy, but I tend to agree with you that unemployment today is more structural. Big business was forced to adapt and become profitable with leaner workforces. Now that they're making money under the new economic conditions. Job seekers will need to keep a close eye on growth industries like healthcare and energy until their preferred industries find a business-case for increasing head count (such as govt' incentives you mentioned).

    Good stuff, thanks for sharing.

  • Ragnar said:

    I believe, despite what folks think, that the USA is headed in the direction needed to produce manufacturing jobs: We've had real income declines for a decade as incomes increase in India, South Korea and China. This is achieved by manipulating inflation numbers (Sure, your TV price has gone down, but you can't eat it) to allow people and businesses to still 'give raises' and lower their real dollar costs. At least the big corporations and exporters.

    The politicians and establishment don't have the guts to tell the American people that this is the master plan. Why not? Because they'd be tarred and feathered. No one wants to hear that they're going to get more poor as they grow older. They don't want to hear that their children and grandchildren will have fewer options and fewer opportunities than the current crop of adults have. Everyone just plays dumb.

    Good ol' Uncle Ben Bernanke is pursuing this policy as aggressively as he can to not spook the markets. He's depreciating the dollar (I don't know about you, but my paycheck hasn't gone up 15% in the last year as the dollar has declined), he's flooding the business world with cheap cash to keep them afloat while he balloons their costs and continues to 'race to the bottom' to lower our costs to be competitive with third world nations.

    With free trade policies, unless we have a corner on cost or on quality (which we have neither), you lose jobs. As chasing quality is a difficult (if not impossible) game, the economies of most of the world 'race to the bottom' to fight for the manufacturing jobs.

    Doing an about face on free trade at this point would be disastrous for the US economy. The only things keeping our (albeit limited) manufacturing sector going are exports. If we closed our borders (just by increasing tariffs slightly, we'd initiate trade wars which would have the same effect as closing our borders), we'd have shortages on just about everything consumer based and there'd be a wiping out of manufacturing jobs still here who couldn't take part in the international market. After all, we saw it in 2008: Businesses will lay off first, ask how bad it is afterwards.

  • Bowmanave said:

    We don’t care so much about the general economy as we do about our own personal economies. When my kids ask me what the “Great Recession” was like a couple decades down the road, I’m not going to have anything interesting to say–because I kept my job, I kept my home, I didn’t really have to cut back in any measurable way. And that’s what I think makes it so hard for Congress to get public support for economic stimulus (or bailouts, depending on your take) or fixing healthcare or whatever. We all look at things through our own lens. If you’re not the one fighting with your healthcare provider, then it doesn’t seem like anything’s wrong with the system. If you have your job, then you don’t feel like trillions need to be spent to fix the economy.

  • localtimezone said:

    I don’t think things are necessarily getting better or worse….they are CHANGING.

    I lost my job of 14 years on Friday. I knew it was coming. Fortunately, this turns out to be more of an opportunity for me than a set back. I have been working part time on a home based business, and after three years, I have had the best January sales ever. I now have time to focus solely on growing my business, and I am taking the stance that I am not unemployed, I am now self employed!

    People are changing the way they do business, they are changing their spending habits, they are more choosy about where and who their money goes to (which is part of why I believe my sales are up), they are changing the way they save and invest, they are much more cautious about credit and they are learning new life and survival skills.

    The best thing is that people are finally realizing what is most important and necessary and are returning to their communities and families for support and are paying more attention to local business.

  • Valentine_505 said:

    I don’t know if the economy is improving but if you are going to be starting a new job soon it could mean that it’s a good time to file bankruptcy. If you have been unemployed and you have a lot of debts that you wish to discharge in bankruptcy then it might be good for you to file before you get a new job. If the economy is actually improving then so will job prospects. If you get a new job then this will possibly impact your ability to file. If you make too much money you may be “means tested” out of bankruptcy.

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