Another reason I believe the economy will be stronger in 2011 than the experts’ forecasts is the improving employment situation. The unemployment rate dropped 0.4% in December to 9.4%. While some people tried to downplay the good news due to statistical factors, this data caused most economists to lower their unemployment forecasts for this year.
My panel of experts lowered the forecast from 9.2% to 8.9%. This is closer to my 8.7% prediction. I am not ready yet to lower my forecast, but I will say that 8.4% by the end of the year is now within reach. Regardless, the government numbers do have considerable “noise”. So is the employment situation really improving? As Yogi Berra said, “You can observe a lot by just watching.”
- I recently spoke at a job seekers group that I used to attend. There were only 14 people in attendance. A year ago, the group averaged around 35. It was announced that attendance was down because five people had found jobs. I can remember meetings when there were five people joining the group and other times when that room of 35 people did not have five interviews scheduled, let alone five job offers.
In addition, some people I met in these groups that I thought would have much difficultly finding employment due to various factors have found jobs in the past few months.
(I know what you’re thinking. Attendance was down due to the quality of the guest speaker. Well if I can stimulate five people to go out and get jobs just so they don’t have to hear me talk, then I guess I am truly a “motivation” speaker. Even though unemployment never caused me to live in a van down by the river.)
- My previous employer has started hiring office and factory workers after slashing half of its workforce in 2008-2009.
- High end jobs are coming back. Fortune magazine reports that job listings for newly graduating Ivy League MBA’s are up 85% over last year.
- A local flatbed trucking fleet is advertising for drivers on the radio.
- DOT reported that total miles driven in November 2010 were 1.1% higher than last year. These people have to be driving somewhere and many more are driving to work.
- Previously I wrote about two industrial facilities in Canton, Ohio closing about the same time around a year ago. I speculated that most of those former workers would not be able to find new jobs for a long, long, time. I was wrong. A local industrial manufacturer has expanded production and is hiring factory workers. A medical company has opened a new warehouse. And finally, a local chip maker has greatly expanded its workforce.
Now again I know what you are thinking; wow, high-tech jobs in the rust belt! Well, not exactly. They are not producing computer chips, they’re making potato chips. But it is a decent wage with benefits. Most of the previously laid off works from the two facilities do now have job opportunities and I doubt if many of these workers with standard mortgages lost their homes. It is much better than the disaster that was expected a year ago.
Still A Long, Long, Way From Home
Of course things are still tough. It is taking people much longer to find jobs, but most people who keep trying eventually finding work. Several people that were in my job hunting groups who I thought would not find jobs due to difficult personal issues have found work in the past several months.
The salaries of the new jobs found by victims of the recession tend to be lower than previous jobs. The Wall Street Journal reports that 36% percent of previous laid off workers found jobs paying at least 20% less than the one they lost. Much of this is due to workers moving from higher paying jobs with manufacturing firms (both white-collar and blue-collar) to lower paying service industry jobs. But once again, this is better that the conditions of a year ago. People who regularly ate at the steakhouse now may have to eat at Perkins. Yes a step down, but there are 71 million people in the Congo who won’t give you much sympathy on this one.
And there is a limit to how far this jobs recovery will go. The unemployment rate is going down due to the business cycle going up. This means cyclical unemployment is going down. But remember, there was both cyclical unemployment and structural unemployment in this recession.
It is now expected that the unemployment rate will bottom out at 7% (instead of the usual 5%) during this recovery. We may be able to even get to the 7% number by the end of 2012 if things continue to go well.
Many economists are predicting that all the jobs will not return until 2015. However, some of the previous jobs were squeezed out of the economy when the labor markets were “restructured” and permanently changed by the recession. Those jobs are gone forever. It will be interesting to see how the resilient U.S. economy responds to this challenge. Where will the new jobs come from? Or will 7% unemployment become the “new normal”?
A Van Down by the River!