Employment is a lagging indicator in all recessions. Businesses cut jobs as a response to a loss of demand. Most historic recessions in this country have been of a fairly short duration (12-18 months) and usually are followed by a return to growth.
This recession is probably going to be different for a number of reasons. One, it is likely that GDP will not return to anything approaching either its former level or historic growth. Why? Because the American consumer has lived on credit for the last decade and it was inevitable that spending binge had to end. The consumer is also showing signs of a fundamental reset in his/her habits. Since he/she made up 71% of GDP it doesn’t take a rocket scientist to figure out it will mean smaller growth.
Second, a recession this severe will cause many to pause for the cause and reassess. A lot of businesses won’t make it in this downturn. The consumer pullback will cause a smaller pie for all to share. That means in one way or the other capturing market share from competition will be nouveaux way to go.
Also, a recession this severe is a chance to streamline and revamp. Many businesses will force change in the workforce by doing more with less.
Finally, most recoveries are led by a building boom. At this point depending on where you live there is a glut of homes on the market. A typical new home will cost $100-$115 a square foot to build, not including land. Today many “normal” markets have an 18-36 month supply of “old” homes on the market at current consumption rates if no more homes come on the market. Those homes are selling for $80 a square foot or less (including land) so there is no real driving factor to force a building boom.
If you examine job growth over time using presidential terms as a guide you find some interesting tidbits. Historically, a President is defined by “job growth” as one of his/her metrics of success. Job growth of 100,000 per month was considered the minimum needed to simply replace dying jobs and population growth. Here are some historical numbers: Nixon/Ford 114,000 Carter 213,416 Reagan 165,000 Bush I 47,542 Clinton 251,802 Bush II 31,250
So without any political bias you can safely say that the George W Bush years were at best anemic in terms of job growth. So we came into this recession lacking jobs and we’ll come out of this recession having shed millions more.
Why are so many jobs lacking in today’s economy? Productivity gains in the last decade have been remarkable. We are still the world’s leading manufacturer, we’re simply doing it with fewer labor hours. That productivity trend has now moved into the service sector as well.
Over time we’ve moved from hunter gatherers to farmers. Then we moved into the industrial age and then into a service sector. It now appears that maturity is reaching the service sector. So what is going to be the NBT (next big thing)? No one really seems to know at this point but one can take a guess and assume it will be incorrect.
NBT’s are led by innovation. The combine and cotton gin gave way to the assembly line. The assembly line gave way to the computer age. So what’s next? Even though we’ve had the computer and information age and the so-called internet bubble we probably haven’t touched what’s to come in terms of man’s ability to gather and understand information around him/her.
The information available on the internet is cutting man’s search for information to a fraction of what it used to be. Want to look into a patent availability? You can do it on-line at a mere fraction of the time it used to take. Trademarks? Same thing, it’s on-line.
Want to know what’s hot and what’s not? It’s on-line and much of it is incorrect but the truth is buried there as well.
Want to know a new trend? Eveyone can be an early adaptor in this new age of instant information. Advertising as we know it is falling by the way side in an age of DVR, Facebook, YouTube and Twitter.
You can examine a claim for its truth or falsehood in a manner of a few clicks in most cases. It’s difficult to know where we’re going with all this information but it’s a cinch to know we’re going at the speed of Baud.
