Contributors

The Shape of Recovery to Come

 Hard or soft landing? It all depends on the sector and the region being considered.
 
By Michael Beygelman
 
Recent news has the economy pointing toward a period of stabilization from the downward cycle we’ve experienced since December 2007. As confidence has risen, the next debate is about what the recovery will look like. Will it be “U,” “V,” or “W” shaped? If we look closely at this month’s jobs report, we already see some wrinkles in the “V” hypothesis.
 
After a month of contraction in job losses, the number went back up in June, indicating that the path to recovery might be a little bumpier and last somewhat longer than most hoped. As we close the second quarter, a lot of important financial indicators will be released in the coming weeks, chief among them second-quarter earnings as well as GDP growth figures. Depending on what these indicate, the shape of this economic cycle will begin a more concrete formation, with all fingers crossed that it will take on the shape of a quickly improving economy. Maybe.
 
While times are certainly challenging, the current recession is not the worst the U.S. has seen. June 2009 saw job losses of 467,000, which exceeded consensus expectations as most believed that we are in the midst of a V-shaped recovery. However, that was not the case. The current national unemployment rate now stands at 9.5 percent, which is the worst unemployment rate since 1983, and many believe that we will hit a double-digit national unemployment average, even testing 11 percent, before we see the bottom.
 
Total job losses for this recession now stand at 7.2 million, but this recession proves to be a regional phenomenon. June unemployment numbers range from less than 5 percent for states such as North and South Dakota, Nebraska, and Wyoming to above 11 percent for states such as South Carolina, Michigan, California, and Oregon. An interesting analysis is how education correlates to current unemployment levels. While the national average is 9.5 percent, college-educated Americans have a national unemployment average of only 4.7 percent, while Americans with less than a high school diploma have a national unemployment average of 15.5 percent. Hopefully this data point will reinforce why it is important for the U.S. government to continue to focus on improving access to higher education for American citizens.
 
Additional validation of a trend that seems to be favoring professional skill sets can be found in future job growth forecasts. Accounting, healthcare, and information technology will each grow by more than 16 percent by 2016, while computer and electronics manufacturing and auto manufacturing will each decline by more than 12 percent.
 
There doesn’t appear to be a quick fix to our employment outlook on the horizon because there is some evidence to suggest that we’re not stuck in some cyclical trend that will return to historic norms, but rather we might be experiencing an irreversible shift in the U.S. and global economies. The automotive and manufacturing industries are undergoing a massive transformation. Financial services firms are changing how they do business, and the types and quantities of skill sets they’ll require for future growth are evolving. Healthcare and alternative energy sectors are garnering a lot of attention.
 
The U.S. government recently played the role of “lender of last resort” to avert a near collapse of our entire financial system. Now in context of job creation, the government might once again play “white knight” and rescue us from additional erosion of the employment situation, even though it might still get a little worse in the immediate future. A substantial amount of government money will be deployed in TARP, economic stimuli, and green initiatives. Unfortunately, these initiatives will largely be funded through increasing U.S. national debt to unprecedented high levels. It took the U.S. government 233 years to amass nearly $11 trillion in debt, yet given the increase in the rate of national debt, the U.S. is on a trajectory to nearly double its national debt by 2019.
 
While we should be thankful as a nation that we have a government that is willing to step in and give us relief from our current economic situation, we must also not let this become an ongoing government handout. We as a nation should leverage this unique opportunity to reequip our workforce with new skills and capabilities to ensure that the government’s efforts create an economy that will enable self-sustained job creation.
 
 
Michael Beygelman is SVP, business development with Adecco Group North America. He can be reached at michael.beygelman@adeccona.com.

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