Curb Your Enthusiasm

Apr 27, 2010
This article is part of a series called Opinion.

Looking for a job as a recruiter? After a long lean period, things are looking up. The long night has ended and we’re still here. It’s over. After two years of layoffs the economy is now creating more jobs than it’s losing. In March, the economy created 162,000 new jobs. The Dow is 70% of the way back to where it was before the recession started. Retail sales are up. Housing starts are up. The ship has righted itself now that the storm has passed.

After two years of decline, any good news will do, but let’s not get carried away. 162,000 new jobs given that 15 million Americans remain unemployed is barely a drop in the bucket. About a third — 48,000 — of those jobs are result of the census. They’ll go away in a few months. 150,000 new jobs are needed per month just to keep up with growth in the population. Since December 2007, the economy has shed 8.4 million jobs and failed to create another 2.7 million, for a total of more than 11 million jobs that are missing. So even with a recovery that was producing 300,000 jobs per month it will be five years before we’re back to where we were before the start of the recession.

How is that supposed to happen?

The engine of growth is consumer spending, and that’s sputtering for a lack of fuel. Consumers are focused on reducing debt, not spending. Spending has increased a little, but given how far it fell it could only get better, if for no other reason than that it could hardly get any worse. The consensus view among economists is that as much as a third of the jobs lost are never coming back, and not because they have been outsourced. Some have been, but that trend started long before the recession. A big reason is increases in productivity — up a record 7% in the last year alone.

Corporate profits and cash on hand are up by huge amounts, but that’s not making its way to spending. Wages have stagnated and even dropped for those employed, and new hires are often at lower pay and benefits than before. There’s not much point being judgmental about this. It’s simple supply and demand. But the fact remains that this dampens any recovery. The only group that has bucked the trend is federal employees, whose pay is up almost 30% over the last 10 years, compared to about 19% for those in private industry.

This is a F***ing Big Deal

Our esteemed vice-president phrased it perfectly, but he was talking about the wrong thing. America’s national debt now equals the entire GDP: about $13 trillion. The cost of the healthcare bill and expected deficits will add another $6 trillion to that over the next 10 years. At some point lenders will demand higher interest rates. One of the biggest lenders is China. As that economy becomes consumer-oriented, they are more likely to spend their money domestically than invest it abroad. Regardless, the current level of borrowing cannot continue. Higher taxes are inevitable. A lot of money will be diverted away from productive activities.

This may not be as much of a problem if the economy takes off, but the best we can expect is a sluggish recovery. The ideas that create lots of new jobs occur when entrepreneurs have lots of freedom to do what they want, take risks, and come up with innovations. Most fail, but some succeed spectacularly. It is very much a numbers game: fail quickly, fail often. But current government policies are hardly supportive of this. The goal seems to be to favor certain industries (green being the favorite color) and promoting those at the expense of others. There are only so many jobs for organic farmers, fuel-cell engineers, and wind-turbine mechanics.

Legislation like the proposed financial overhaul, however well intentioned, will only add to the burden on businesses, without doing anything productive, or in any way guaranteeing that the recent debacle won’t be repeated. Where we’re heading is a combination of the European and Japanese models. In Europe the government keeps you safe from all the nasty things in the big bad world, and in return you only have to put with 10% unemployment, stagnant growth, and high taxes. In Japan the Ministry of Trade sets industrial policy, basically picking winners and losers. That doesn’t always work but they’ll eventually figure it out; so what if it results in 20 years of stagnation?

The continuing extensions of jobless benefits is another symptom of this. Currently it’s at 99 weeks, or almost two years. People need help. No question about that. But instead of shoveling money at them it would be better to give employers incentives to create jobs.

There’s a reason why most patents in the world are filed in America. But we can’t have it both ways: a roaring economy and perfect control over all that could go wrong.

Where the Jobs Are

Recruiters looking for work should look to the government. The Feds are going to need lots of recruiters. The Partnership for Public Service estimates that the Feds will add about 600,000 new jobs in the next four years. You can get the details here. The IRS alone will add 16,000 new agents to enforce the requirements of the healthcare bill.

It would be better if those jobs were in the private sector, for the simple reason that government jobs don’t create wealth (in the wider economy, that is). In the private sector, the most reliable source of jobs will be energy. Recent moves to expand drilling for oil and encourage the development of nuclear power will create tens of thousands of jobs. And that makes some people mad, but that’s an added bonus.The level of hiring anywhere else is hard to predict unless we all start eating more organic food.

This article is part of a series called Opinion.
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