Opinions on the Economy for Today and Tomorrow
The jobs report came out last week and it left me utterly befuddled. It wasn’t good, but it wasn’t as terrible as it appears (relatively speaking of course). There’s a certain segment of employment that has shrunk and is never coming back. A CNNMoney.com article claims it could be almost 8 million jobs. But conversely there are certain types of jobs that are going unfilled because the number of candidates to fill them are few. For instance, last week the NY Times published a story about manufacturing companies struggling to find candidates who knew how to work a sophisticated computerized machinery. And now I’m reading about something called rural sourcing. It’s mostly the same advantages as outsourcing, but it’s hiring or setting up facilities in small towns in the US. At one point taxes were such a monetary consideration that places like China and India were no brainers. But now states have wised up and they offer tax incentives to encourage these developments. The states recoup the lost business tax by having income tax from the employees and the cursory taxes associated with the business ecosystem that the facility supports. Things like gas stations, restaurants, delivery, markets, and so on.
I can only offer several educated guesses as to why the US is still in this malaise. My basic idea is that education hasn’t adequately prepared the same level of people as it has in the past. I’m not trying to romanticize it, there’s always been only a handful of people with audacious goals and the vision to accomplish it. But I feel like even that small number is currently at it’s lowest levels. Wealth creation needs these people.
My main other opinion is the spread of the rich, middle class, and the poor has widened to the brink . The US brand of capitalism needs a healthy middle class to drive supply and demand. Supply is still there, but the buying power of the middle class has been decreasing over the last 10 years. My overly simple explanation for this is the attention of the quarterly earnings report. Big businesses are not paying their workers like they used to because they are pressured to show positive results every three months. Cash is either distributed through a dividend or stashed into cash on the balance sheet. This helps the investors and the executive leadership, but does little for the average worker who ultimately buys the goods that are produced.
I’m extremely optimistic for the US in the long run though, assuming we get past the next five years. Areas like health care, energy, information and people are primed for value creating totally new opportunities. I don’t see China, India, Europe, or any other country having the resources, skill set, and ideology to accommodate these on the horizon favorable circumstances.
Working Thoughts 7/9/07
When Discipline Gets in the Way