October 2008 Job Report Analysis and a Look Ahead

The October 2008 Job Report was pretty bad. Not only were the October numbers really poor but the revised September 2008 numbers were revised to 284,000 jobs lost. Between the two months that is a loss of 524,000 jobs. In 2008 alone almost 1% of the job market is gone. 1% doesn’t seem like very much but when you couple it with wages that have been stagnant for several years you get a job market that is very poor and uninspiring to the worker.

But what is causing this job wage malaise and subsequent contraction? I theorize that the losses of the late ’70s, early ’80s and finally early ’90s were the result of the US economy moving from a manufacturing base to a services based economy. This shift required a new skill set to be developed. Many of the skills transfered from blue collar to white collar and the rise of the personal computer. I could probably rationalize another change in the economy from services to intellectual but that sounds a little like splitting hairs. Is it the overarching impact of globalization? I say yes. The US is moving to understand globalization… finally. This shake out will benefit the US business community because the expectations are much more known and opportunities to profit will expose themselves. For instance, right now the focus on globalization is the exporting of jobs and work, but after the current economic situation plays out other nations will import US services at a higher rate again. But the questions are how and why?

The US needs to be good at something again. Over the past 100 years the US has been good at war (still is), manufacturing, infrastructure building, education, IT, agriculture, and finance. Over the last 15 years the rest of the world has overcome a certain undefined threshold and is now very good at many of the items listed. The current US leadership (for two more months) has focused on war as the next innovation driver. And that is too bad.

The next innovation drivers should be energy and healthcare. Both have so many inefficiencies and business opportunities.
The problem with energy is mostly image. The investment it needs aren’t coming in like they should because of a perceived need to overcome economies of scale. And economies of scale are an issue, if your business plan is one of large initial purchases. An incremental business case would be a good one to pursue. Another issue with energy is regulation. Tapping the energy grid or upgrading it is very difficult to do.
Healthcare has an information problem. HIPPA helped create the problem because paranoia crept in. But standardization in healthcare patient records will begin a domino affect in the industry. As soon as the waste of inaccurate, unknown, and not up-to-date data is resolved the resources spent on correcting this issue can be pointed at improvements in testing, care, prevention, and medicines.

Without these two potential job creators the job market will continue to degrade. A few weeks ago I predicted that the US job market would be deep and quick. The deep is starting. I expect it do bottom in February of 2009, level off over the following six months and then start to really improve in the fourth quarter of next year. I even expect this improvement to be pretty dramatic as well. In the mean time, I encourage everyone to round out their skills. Read varied books, take a class, and participate in some local organizations. You never know which connection will get you the next opportunity.


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