The problems in Japan started when an “asset price bubble” burst. This resulted in the Japanese economy basically stalling out (with weak or negative growth) for around 10 years. The problems here started when the housing market bubble burst, leading to severe damage to our financial system (Japan’s financial system was similarly damaged back then). Additional damage occurred because the housing bubble also diverted capital to that should have been invested in other developing industries rather than housing. When the bubble burst, these industries were behind the foreign competition and were not providing the jobs they could have.
If we say the economic problems started in January 2008, we are over five years into an economic malaise and we don’t really know when a strong recovery will begin. The stock market is smoking, but it just recently exceeded its previous peak. Any shock or cyclical correction would put us behind again.
The part of the economy where we are really losing is the job market. We frequently talk about unemployment numbers. But numbers do not get unemployed, people do. And the people losing the most in this mess are those who lost jobs since 2008. Once you lose your job in this economy, you can stagger around in the “employment wilderness” for years. Not being employed productively in your field of expertise causes you to lose income, professional value and personal fulfillment. Here are some examples from my personal network (names changed):
|This economy can make you feel like |
- Rich is a marketing executive who was let go in 2007. Under normal circumstances he would have found another position in his industry in 2008. However due the recession, he bounced around several jobs outside of his industry before finding something that fully utilized his experience in 2012. Rich lost five years of productive work.
- Bill is a 53 year-old industrial engineer. He has been unemployed for two years because his skills are most valuable when companies are expanding. Companies are not expanding in this uncertain environment. Bill’s loss is two years and counting.
- Cindy is a 50-year old marketing communications professional who was laid off from a large company in 2010. She found a new job within a year with a small Internet-based communications firm. However, she did not fit in with the culture of the new company and lasted less than two years. She is back looking for work the second time in three years. Even though the job situation has improved since 2010, there are still four unemployed people for every job opening and competition for good jobs is fierce. She is on her way to losing two years.
- Joe, a web-based marketing guy, was downsized from his company and it took him 15 months to find a new position. But after two years, his company was sold and he is on the market again. He will also lose two years.
- Craig is a 54 year-old marketing communications professional and has been looking for work for three years. Becky, a product manager, has worked one year out of the last four.
- Many college graduates have not found jobs in their field. Some are still looking three years after graduation while working part-time. They just lost the first three years of their careers and it will take them three years longer (or more) to pay off sizable college loans.
All these people have valuable skills that they could be using to grow the economy, but they can’t because companies are not expanding, jobs are not being created and the economy is plodding along. This is a huge waste of human capital. The economy suffers and the people suffer.
And the suffering has consequences. Largely due to the Great Recession, the U.S. Centers for Disease Control and Prevention reports that the suicide rate for men in their 50’s has increased over 50%. Rates for other demographic groups are up also.
If we have already “lost” five years, when will this end? The Wall Street
Journal reports that at the current rate of job growth
(adjusted for population growth) it will take nine more years for employment to
return to pre-recession levels. Of
course the rate of job growth is expected to increase soon. However if it takes
even five more years (instead of nine), then five plus five I believe equals a
decade. We haven’t lost the decade yet,
but we are well on our way.
|Is this guy running our economy?|
Some people may argue that the situation is not that dire and that displaced middle-aged workers will just have to work into their 70’s to make up the difference.
But just because people are living longer in general does not mean people are healthy enough or able to work this long. If you have to work that long, there is no guarantee that you will even have a retirement.
For example, my friend Jerry, age 64, planned to finish his long, successful, career this fall and begin enjoying a great, extended, retirement. They buried him last week.
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