This ain't no ordinary recession
Friday, March 6, 2009 at 08:24PM My fellow New York Mets fanatic Peter Goodman has a sobering story in the New York Times which posits that the crushing job losses represent a fundamental shift in our economy.
His thesis: the three hardest hit sectors -- manufacturing, retail and financial services -- aren't suffering short term losses; they're permanently downsizing and restructuring. The money paragraph:
"These jobs aren’t coming back,” said John E. Silvia, chief economist at Wachovia in Charlotte. “A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations. Firms are making strategic decisions that they don’t want to be in their businesses."
In other words, this isn't an ordinary recession, and we shouldn't expect an ordinary recovery. Normally, recessions are followed by a rapid period of job growth. In this case, however, recovery may simply mean stabilizing job losses; we might be looking at a permanent 10-12% unemployment --similar to Europe -- at least until a new generation of workers come online -- workers that will need to be better educated and more skillful.
What's really worrisome: we're global laggards when it comes to education, particularly math and science, which will likely serve as the building blocks for the winning economies of the future. On top of that, we've under-invested in job training for adults. We've skated by for a few generations by creating the mother-of-all-consumer economies, but our credit and leverage has finally maxed out, and now it's crashing down around us.
So to sum it up: we have an unskilled workforce, disappearing industries, a mediocre-at-best education system, and an economy undergoing a fundamental shift. Not good.
Footnote: Try this stat on for size: since inaguration day, the market is down 20% -- the largest decline to start a new administration. Since election day, it's down an unbelievable 31% percent. Is this Obama's fault ... well, he obviously inherited a huge problem, so it's hard to blame it on him. But, his constant fear-mongering and talking-down of the economy certainly hasn't helped, either.
Reader Comments (2)
The economic future got out-sourced, off-shored and over-leveraged. There will have to be a new model to replace the broken one. The old model has melted down to goo.
Housing starts and car sales as economic measuring sticks? Not any more.
The new measuring stick may be how many silicone chips are produced. Or monetized web traffic. Or how many potatoes you can grow in your backyard.
The observer is correct. The good old recessions were slow-downs, Then back to work we went. In the Grave New World it's going to be different.
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