Jobless recovery–that?s an obvious oxymoron if ever there was one. I first heard the term coming out of the last recession in the early 2000s. Then as now, the economy was somehow miraculously growing without worker participation. Now the term is starting to be heard in connection with the latest ?recovery?, and it seems just as meaningless now as it did back then.
Do you ever get the feeling that most of what economists mean when they talk about ?the economy? is a semi-worthless pile of possibly bogus statistics?
Mark Twain was credited with saying, ?there three kinds of lies: lies, damn lies–and statistics?.
To that I say a big, fat AMEN!
If you have a sense that economy isn?t quite recovering, you?ve got a lot of company?I mean apart from just me. A recent article from CNNMoney (posted on Yahoo!Finance), titled How the middle class became the underclass confirms our worst suspicions.
?Incomes for 90% of Americans have been stuck in neutral, and it’s not just because of the Great Recession. Middle-class incomes have been stagnant for at least a generation, while the wealthiest tier has surged ahead at lighting speed? While globalization has lifted millions out of poverty in developing nations, it hasn’t exactly been a win for middle class workers in the U.S.?
Most significant it seems, is that the apparent decline in economic opportunity seems to be less a matter of the recent recession, and more a factor of longer term trends. Translation: even if the economy is getting better, it won?t necessarily benefit us in terms of employment.
In We Don?t Need No Stinkin? Jobs (in the U.S.), Charles Hugh Smith at Of Two Minds defines how the growth of the middle class in the developing world is lessening the reliance of major corporations on U.S. sales, and by extension, U.S. jobs:
?As the discretionary purchasing power of the American middle class erodes, four times as many new potential customers appear elsewhere (China, India, etc), hungry to taste the Oreos, become consumed by the iPhone, etc., and ten times as many are potential buyers of toothpaste and other basics?The concern for domestic jobs is mere political expediency.?
As revenue sources grow overseas, business gradually moves operations closer to profitable markets, hence the off-shoring of jobs and complete elimination of operations in the U.S. The fact that wages are also substantially lower in those locations only accelerates the process.
This trend has been long in operation, but largely papered over by the expansion of the financial services industries since the 1980s and running through the early 2000s. With the ?07-?09 financial meltdown, the results of the global shift have become more apparent, and there?s little reason to believe it will reverse.
For those of us in the vast and embattled middle class, the only workable option is to adjust to the new reality. But how do we do that in a practical way?
Accept reality, rather than sugarcoating it or denying it
We often hear talking heads, politicians and even people on the street trying to convince us?or maybe themselves?that the slow burning, long term erosion of the middle class isn?t real. But the anecdotal evidence is all around us in the lives of people who are losing jobs, lifelong careers and even their homes. I know many people in that situation and you probably do as well. Statistics are increasingly backing up the reality that those individuals are facing.
If it?s true that individual experiences and statistics are pointing to a more limited future, there will be no tangible advantage to denying that reality.
Only by acknowledging reality and adjusting our tactics to deal with it do we have any chance of making a better life for ourselves in an uncertain future. Vesting ourselves in happy denials and trusting that the big picture will magically right itself is not a plan.
We can?t go forward until we recognize that the past is gone
There?s a temptation to believe in the past, that the same factors that drove previous eras will also save us today. We might have fond memories of more reliable economic times of the 1990s, 1980s or even the 1950s. But those decades, and the conditions that made them what they were, are long gone. The future isn?t in the past?the future is in the future.
The post World War II order that so reliably insulated and advantaged the U.S. and other nations is gone, and while we might be nostalgic for it, the global environment we?re in today is much different from that world?and it?s our world now!
Take active steps to turn your own ship around
Facing reality is mostly a mental exercise. It means asking questions we wouldn?t before and being prepared for the answers?what ever they may be. It means overcoming a life of indoctrination and entrenched worldviews, and being open to possibilities that are well beyond our personal paradigms. It also means practical action, such as the following:
- Debt elimination. Lifelong job security is long gone, yet people continue to borrow as though it can still be relied upon. But if the future will be less reliable than the past we can?t afford to continue on that course. Stop taking on new debt, payoff old debt, and work to be debt free. Freedom of action is critical against uncertainty, and you can?t have that when you?re in debt.
- Emphasis on savings. A strong cash position is one of the best insulations we can have. Forget about arbitrary guidelines like saving 10% of your income?save all you can. The more you have, the more options you have for what ever you want to do.
- Developing specialized skills. We can no longer rely on a stable job?what ever that is anymore. Strong skills are becoming more important all the time. Our stock in trade depends on what we can bring to the market place. If we?re weak on marketable skills we need to develop them, if we have them we need to improve them?constantly.
- Multiple income streams. Be open to the possibility of procuring new income sources. Though it isn?t certain yet, our ability to rely on the income stream from a single job is in jeopardy. An online business in combination with a full time job will not only provide additional revenue, but it may give the confidence needed if the reliability of that job were suddenly thrown into doubt. Experiment, implement and improvise, but spread your wings. Your future may depend on it.
- Entrepreneurialism. Full time jobs with living wages and full benefits are becoming harder to find and harder to keep in many fields. Self-employment may be the best hope for anything that looks like a secure future. Stop thinking job, and start thinking business.
- Expand your social and business networks. If what we loosely refer to as ?the system? is no longer reliable, we need people more than ever. That includes family, friends, and business contacts locally, nationally and even globally. You never know where opportunity will come from and the more people we?re connected with, the greater the chances of capitalizing.
I believe that we?re in the early stages of a massive shift in the global economy, a change that will be as dramatic and sweeping as the Industrial Revolution, but has yet to be clearly identified and labeled. To the degree that the shift is either positive or negative will have everything to do with our willingness to embrace the shift and change our behavior. Resist it and cling to the past, and we can become victims. Embrace it, and we can be beneficiaries.
What are your thoughts? Do you believe that we?re in?or coming out of?a recession, or do you think that bigger events are playing out? How significant are those events and the changes they?re bringing? How do you think we should be preparing for it?
While I totally agree with your advice re: steps 1-6, I do disagree that we’re not in a solid recovery. Employment figures are ALWAYS a lagging indicator to growth. Employers who’ve laid off workers will wait until they absolutely have to hire new ones. They won’t hire someone until their workers are so overworked that they start threatening to quit.
All of my clients’ business is much better than six months ago. But none of them are hiring yet.
Robert – There’s a lot of truth to what you’re saying. The problem is that employers are learning to run their businesses with fewer workers. Technology and off-shoring are not only weakening the job base, but they’ve become part of the employment landscape. Employment may pick up as the economy firms, but fewer people will be needed. That’s what we need to prepare for.
Profits for major companies are rising even as the economy was in the tank, and jobs were few, because business is increasingly coming from overseas.
Solid advice, very similar to what I give to all of my friends that have been affected by “the Great Recession”.
Fortunately, I faired great during the recession. So I count my blessing and try to prepare for the future.
Kevin – Your six points are on target. Great job. They also embrace a reality that some folks don’t want to acknowledge – that the only person responsible for wherever you are in your life … is YOU. Build a better you (through education, better cash flow management, debt elimination, etc) and you will be better off when it comes to finances.
Robert M – While I agree that the US economy is in better shape than it was in Winter of 2009, we have not really recovered to where we were in 2006. Business is better, but it sure isn’t booming (as the restatement of Q4-2010 GDP to 2.8 shows). There isn’t going to be any new hiring any time soon and that is how the general population views business cycles, “Am I working and is my income increasing.”
John – I agree that we’re getting some sort of upward bounce in the economy, there are plenty of signs. But what’s more significant I think is the absence of any economic drivers–like new technologies or whole new industries.
Sure, we’re seeing improvements in cell phone- and video game- technology, but that isn’t the kind of improvement that builds the hundreds of thousands of living wage jobs.
The “growth” seems to be coming more from top-down pushes from the government via temporary tax breaks, tax credits and bailouts of ailing industries. But until we see some convincing bottom-up trends, the recovery looks hollow and probably temporary. Which is where we get back to battening down the hatches for the long haul.
It might be best to use this time as a breather, to re-evaluate and re-focus. Thinking the “good old days are back” could be a major miscalculation.
Well said Kevin. The middle class has been stuck with the tab for the excesses of both the left and the right. Many have neither the pensions and benefits of unionized workers nor the huge salaries of corporate executives. And yet when these two factions contribute to economic calamities, the middle class is handed the bill. We may not be able to change any of this, but your 6 steps are a great way to adapt to these realities.
I think that bigger events are indeed playing out here and how we handle them individually and as a society will determine whether they turn out to be positive or negative. The recovery is real to the extent that corporate profits in many sectors really have recovered. But if the only reason for their recovery is the Fed policy that continues to support negative real interest rates and inflated asset prices, then it is built on quicksand and will end with the same bust as the last jobless recovery.
Balance Junkie – It seemed to take an unusual amount of stimulus just to get the econmy going in a positive direction. But unless things start moving due to natural improvement (ie, grass roots growth) we probably need to be prepared for what ever might happen.
Hi Kevin, I somehow forgot to comment on this one! I totally agree that the economy is not doing well at all. I personally believe we are in a mild depression, not a recovery.
The middle class is quietly disintegrating as jobs go overseas and don’t come back, leaving people to work jobs below their skill level. A few years ago I bought appliances at Home Depot from a man who was formerly a manager at MCI. Last time I checked he was still there, making about half what he was before.
I really like your steps on how to cope with the new reality. My husband and I have paid off almost all our old debt, and we plan to be left with only short term business debt. We’ve saved/invested a lot of money, and have improved our skills in Spanish.
As far as multiple income streams go, my husband is starting a side business while being employed by a company. Not only does he not want to work there forever, he doesn’t want to be dependent on that source of income.
Speaking of social networking, that’s what we’re doing right now. 🙂
Hi Jennifer – My wife says you can tell what’s really happening in the economy by the person waiting on your table in a restaurant. In good times, they’re usually young, high school or college age. In bad times, they’re adults. It seems that a lot of adults are working in restaurants these days (and department stores, convenience stores, etc.). Based on that metric, we aren’t doing so well.
You’re husband is thinking the right way. Even if the side business doesn’t generate a full time income, at a minimum it will be a valuable extra income source. We’ll all need those in the days ahead it seems.