Aware Brain

The 10% employment rate  (or 17%, depending upon how you count) is old news by now. Whether it hits 12%, 15% or drops to 9% next year is immaterial. The more valuable vision is to look at where employment, and the economic conditions will be in 3 – 5 years. Many of the decisions you make today will have a significant bearing on successes in 2015. This time horizon is not as far off as it seems. Five years ago was 2004, imagine what you were doing then, and how it does not seem so far in the past.

What determines the ultimate employment landscape will be the true fundamentals, after all of the oscillations die down from boom and bust, bubble and contraction, and short term reactions of businesses to perceived growth and slow times. So to start with, do we expect that more workers will be needed in 5 years compared with today? What will they be needed for.

According to a study released today, the jobs are not coming back. The long-term picture for workers and families is even worse than current job loss numbers alone would suggest, the article states. “This is very bad news but we must face facts. Many of the lost jobs are gone forever.” Making matters worse is that of the remaining jobs, studies suggest that a quarter of U.S. jobs are fully out-sourceable over time to other countries.

Noriel Roubini is professor of Economics at the Stern School of Business at New York University, and his analysis is that “The damage will be extensive and severe unless bold policy action is undertaken now.”

What jobs do remain are likely to be part of a permanently altered work environment. “When the 15 million unemployed Americans do find jobs again, they’ll return to a workplace that is likely to have grown accustomed to less pay for more work, or at least working less hours in a week. The raises that were once part of an annual employee review, if not entirely gone, will take years to get back to where they were before the recession.” The American worker is already facing pay cuts, forced days off without pay, eliminated retirement benefits and having to do the extra work of laid off coworkers. “The ones who have jobs are willing to give up a lot to keep them,” Tom McCoy, a compensation consultant at Intellithink, told McClatchy.

The current employment picture is simply the beginning of the trend towards a severe conclusion. In fact, the last 10 years have been a slowly stalling jobs market, which went mostly without being noticed. “Over the past 10 years, job creation has been extraordinarily weak. In September, on a seasonally adjusted basis, there were 108.5 million private (nongovernment) payroll jobs in the united States—almost precisely the number there were in June 1999″, according to Slate.com, which provided links to the underlying data.  That may seem OK, except when you consider that population grew 9 percent during those years, from 282 million in 2000 to 308 million today. Those extra 26 million people need a means to provide for themselves as much as anyone. If we already lost this much ground before the recession started, how bad will the next decade be?

As the jobs disappear, some of the losses are not evenly distributed, but concentrated in local areas. Many rural areas are suffering when large local employers shut down. “Some rural communities have been reliant on just one industry for many years,” said Orrin Bailey, CEO of Michigan Works. For such communities, the loss of a large local employer casts a long shadow. Tax revenue falls, hitting local services from schools and healthcare to police forces and firefighters.

Van Straten Brothers Inc has built everything from forklifts to bridges for the their main customer, Terex Corp which is closing its local factory by year’s end. The brothers have cut down their staff to 12 from 60 and say they are in survival mode for the business their father started out of his garage in the 1960s. “We’re hunkering down,” Pete said. “We’ve always been debt free, so we’re hanging on. But we can’t hold on forever.” As the Terex plant winds down the local jobless rate is expected to top 30 percent.

Areas which are being affected first by the creeping depression can become deteriorated quickly. In Mobile County AL, homes are crumbling and falling apart at the seams, with the occasional boat or car stranded in a garden or alongside the road. The occasional restaurant or closed business are empty building lining the road.

As I wrote a few days ago, I believe that areas such as these are the front lines of a creeping malaise, which will continue to invade other areas of the country as the depression worsens.