The last time I talked to Morningstar’s Bob Johnson, it was 2009 and we wondered if we’d “hit bottom.” Two and a half years later, things still feel a little similar.
The jobs report we wrote about today was more of the so-so stuff, with fears of a recession decreasing but life still tough for job-seekers in many fields. Here’s what Johnson and I talked about today as we thought more about the numbers:
We needn’t wait for a magic bullet. You may have read that for unemployment to go down to 7 or 8 percent, we need to grow the economy by some ungodly number that’ll never happen unless we find a way to invent another Internet, make milk chocolate out of solar power, and so on. Johnson’s not sure it’s all that bad. Sure, he says, we’ve lost maybe 8 million jobs and gained only a quarter of those back. So at this rate, depending on who you ask, it’ll be until 2018 or 2020 or 20-something-crazy until life returns to normal. But Johnson says it needn’t take a miracle, or a decade. For one, he says, there are jobs, of course, and some people will go back to school to prepare for them. Also, he says, some things will just improve, like the next bullet point here, construction.
More houses need to be built. Johnson says the country needs somewhere between a million and a million and a half homes to be built each year — but only a half or a third of that is being built now. More housing construction, he says, needs to happen, and eventually will happen, sharply increasing employment in the construction industry. “We aren’t all going to move in with our parents.”
Meanwhile, cheaper housing is making life cheaper for some. Although it may seem like few people are buying and selling houses, Johnson notes that maybe 5 million houses are being sold annually, or about 20 million over the last four years. This, he says, is an economic silver lining because this was “pretty cheap housing,” he says, houses bought somewhere around a third cheaper than before, perhaps enabling some couples to more easily forgo one income for a while, or for one spouse to cut back on hours.
It’s still tough for college grads. I told Bob Johnson that although the unemployment rate is floating around in the 4% range for college graduates, it sure doesn’t feel like it when I know people applying for jobs with 300 other candidates competing. He agrees, saying that the unemployment rate for graduates is in the 2% range in a stronger economy, so indeed, “it’s not as strong as it usually is.”
He also notes that the figure includes anyone who has ever graduated. In other words, to take an extreme case to make the point here — every graduating senior could have trouble getting a job, and it would still not increase the unemployment all that much, since there are tens of millions of Americans who’ve graduated college, and maybe less than a million graduating annually looking for jobs (since some go to graduate school). Johnson notes that his daughter, a Dartmouth senior, knew of an informal survey done at Dartmouth showing that only about 27% of the senior class had a job a month before graduation.
Stores and shopping are changing. I told Johnson it sometimes feels like a deep recession here in Los Angeles, with stores going out of business and the (not atypical) sign on a restaurant door I saw last week saying, “after 16 years, we just couldn’t pay our lease.” I also told him that I thought Amazon and other, more-or-less sales-tax-free shopping options like Diapers.com, are hurting in-person retail. He said that “retail numbers are pretty good,” but that “stores don’t want to compete on price, they want to compete on hours.” Target is finally opening up at midnight, Thanksgiving night. He also notes that self-checkouts at stores, like the groceries he visits in Chicago, are resulting in fewer jobs. Anyhow, he says, “retail employment hasn’t been as robust, but it isn’t fall-of-the-cliff awful.”
Fear of the unemployed lives on. Of course, people’ve talked about this on ERE like Ron Katz, and he’ll get into it more in San Diego next spring. Johnson says “people don’t want to hire someone who doesn’t have a job,” and that they think, “there must be something wrong with this guy.” A big contrast, he says, to engineers, and many accountants, he notes, who, as ERE regulars are experiencing, can choose between multiple offers.