{"id":4329,"date":"2011-06-03T06:04:33","date_gmt":"2011-06-03T12:04:33","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=4329"},"modified":"2018-09-21T02:06:11","modified_gmt":"2018-09-21T06:06:11","slug":"top-5-problems-facing-the-economy-5","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2011\/06\/03\/top-5-problems-facing-the-economy-5\/","title":{"rendered":"Top 5 Problems Facing the Economy 5"},"content":{"rendered":"

The final problem among my “Top 5 Problems Facing the Economy<\/a>” is endemic unemployment.\u00a0 By “endemic,” I mean that the Great Recession seems to have created a permanent change in the employment landscape of the First World.<\/span><\/p>\n

During the deep and sustained economic downturn of 2008-2009 many millions of employees in the United States and other countries lost their jobs<\/a>.\u00a0 Now that the economy has not only actually recovered fully, but also grown past pre-recession gross domestic product (GDP) figures, most of those lost jobs have not come back.<\/span><\/p>\n

This is an indication that many of the jobs that were in place were either tied to the last economic bubble (i.e. real estate jobs, like construction or realty), or were part of the economic “fat.”<\/a><\/span><\/p>\n

Lost Real Estate Jobs<\/strong><\/span><\/p>\n

It will take many years until the glut of properties that were built during the real estate bubble is fully absorbed by the economy.\u00a0 That means those construction jobs just are not going to come back anytime soon.\u00a0 For blue collar workers this type of loss of jobs is more critical than for white collar workers.\u00a0 Why?\u00a0 Because there seems to have been a permanent loss in demand for construction workers.\u00a0 Let me explain further.<\/span><\/p>\n

White collar work typically focuses on generic functions, such as data entry, information technology, management, accounting, human resources, and so on.\u00a0 While the tasks here are specific, the industries in which they are executed are not.\u00a0 In other words, you would expect a displaced IT worker at a construction firm to be able to find a similar job in a different type of business, say an insurance company.\u00a0 So there is still demand for generic IT employees, just not necessarily within the same specific industry.<\/span><\/p>\n

One of the hot careers in the lead up to the Great Recession was to be a realtor, or a mortgage broker.\u00a0 With the collapse and subsequent real estate industry depression, these jobs also seem to be permanently lost.\u00a0 However, unlike construction workers, sales positions exist in many industries.\u00a0 So realtors and mortgage brokers should be able to eventually find new work.<\/span><\/p>\n

The Fat<\/strong><\/span><\/p>\n

Given that corporations are generating record profits that now exceed the profitability levels pre-recession but with far fewer employees than before, you would have to conclude that many of the workers at firms were excessive.\u00a0 What that means is that the businesses that are running lean and mean will only add employees commensurate with revenue and profit growth.<\/span><\/p>\n

Since the GDP is growing at around 2-4%, you would expect employment to only grow along these same lines.\u00a0 Unfortunately, the population grows at about 2-3% per year and the economy has to be able to absorb these additional workers.\u00a0 Ultimately, that means that GDP growth in excess of population growth is around 1-2% per year.\u00a0 So job growth that tracks economic growth is going to be slow, if not very slow.<\/span><\/p>\n

What’s more, many companies now have very sophisticated information technology in place that tracks revenues and profits very specifically, along with employee productivity.\u00a0 That means that businesses are highly unlikely to accidentally over hire.\u00a0 So employment growth is likely to track economic growth for many years to come.\u00a0 Normally that wouldn’t be a problem – but the economy still has 4 million people looking for work who cannot find it.\u00a0 Ouch!<\/span><\/p>\n

The Problem<\/strong><\/span><\/p>\n

Unfortunately, the economy seems to be re-entering the economic “game of chicken”<\/a> that I spent much of 2010 writing about.\u00a0 Here, consumers confronted with high national unemployment figures spend money only nervously.\u00a0 This leads to stunted economic growth, which causes corporations to be cautious in spending money on hiring.\u00a0 That cautiousness on the part of businesses means that the unemployment rate stays high, thus continuing to scare consumers.\u00a0 Repeat.<\/span><\/p>\n

But even if businesses do, in fact, begin to hire employees to track economic growth the economy has to absorb the slack of 4 million unemployed folks.\u00a0 But even if that happens, many of the people who lost work during the Great Recession who now are re-employed, are now under employed.\u00a0 That is, they have jobs but at pay and responsibilities levels well below their peak pay and responsibility levels.<\/span><\/p>\n

All of this means that the Great Recession may very well have permanently shifted what we consider to be normal unemployment levels in the United States.\u00a0 Previously unemployment levels of 5-7% were considered normal.\u00a0 It may be the case for many years (say several decades) to come that unemployment levels of 7-9% are normal.<\/span><\/p>\n

One of the overarching problems is that businesses have free-agency in terms of hiring, but employees do not.\u00a0 That is, a corporation can outsource its jobs to other countries where workers are paid lots less money.\u00a0 Unfortunately the same cannot be said for most employees.\u00a0 Because of tough immigration laws all over the world, a displaced first world worker is trapped unemployed in his\/her home country, unable to shop globally for work.\u00a0 This asymmetry of opportunity spells doom for your average citizen.<\/span><\/p>\n

What can be done?<\/strong><\/span><\/p>\n