Why Your Job is Gone. Permanently.

Vic Napier, MBA

August 2009

 

There has been talk recently about “green shoots” and an end to the recession. It is devilishly difficult to know when a recession is over until long after recovery is underway, so it is probably too early to celebrate. But who knows? Maybe we are on the verge of an economic resurgence. One thing is sure, though – your old job is not coming back any time soon, and it is likely gone forever.

Here’s why.

Traditionally mass layoffs are the result of cycles in the economy. A downturn in consumer spending means less demand for goods and services, so employers lay off employees. These are temporary layoffs. Because the employer believes business will pick up in a few weeks or months he might maintain a relationship with the laid off employees, sometimes even to the extent of assisting with unemployment benefits.

With the 1991-92 recession something different happened. Layoffs became permanent. Instead of new hires going back to the jobs they had before the recession, the majority of new hires went to newly created jobs, sometimes in new industries. The old jobs had disappeared, and there were not enough new jobs to go around. It took several years to create enough jobs to bring employment back to pre-recession levels and the term “jobless recovery” came into common use.

A change in the basic structure of the economy had occurred. In the early 90’s the economy was shedding the last of the manufacturing industry and transitioning into a service economy. That recession was not the result of a typical downturn, but rather the result of fundamental changes in the economy.

Economists started using a new term, “structural adjustment” to describe this kind of economic downturn.

The next recession in 2001-02 was another structural adjustment. Although it is still called the “Dot Com Bubble” because it was centered on emerging technology industries, its’ impact was felt throughout the economy. Again, we experienced a jobless recovery because the underlying structure of the economy was changing. This time it was computers and the internet that eliminated one set of jobs and created another.

Something new happened with unemployment numbers during this jobless recovery. Good jobs were scarce – everyone knew someone who was looking for work – but the unemployment rate never went over 6.3% until June of 2008. How could that be?

Two reasons. First, in 1995 the government redefined unemployment. People who could not find work were now called “marginally attached workers” and were no longer counted as unemployed. If we add this group to the official unemployment figure for March of 2002, the unemployment rate jumps from 5.7% to 9.4%. Also, between March 2002 and April 2003, more than 500,000 people became self-employed and dropped off the unemployment rolls completely. Although no figures exist it is assumed that many of these people became “contractors”, and worked for low pay and without health or unemployment insurance, doing short-term work first for one employer and then for another. The official unemployment rate rose to 6.0% in March of 2003, but adding marginally attached workers pushes it to 10.2% (Groshen & Potter 2003).

As of July 2009 the unemployment rate, including marginally attached workers, was 16.3%, while the official rate was 9.4% (BLS 7 August 2009). This is well within the unemployment rate during Great Depression, which peaked at 25% in 1934, six years after the initial economic collapse.

It is too early to tell what fundamental economic changes this recession will bring, but it is shaping up to be another jobless recovery. The most optimistic economists are predicting 2011 as the year jobs will begin to rebound. But consider this – how many of the jobs of 2008 will exist in 2011? Business is always looking for efficiency, and their biggest expense is employees. At the same time, computers are becoming faster, and software more sophisticated. Jobs that repeat a process are prime targets for replacement by computers.

Another wrinkle is the expanding “contingent workforce”. Employers are always lookingfor cheaper alternatives to traditional employees, especially during a recovery when nothing is certain. Temporary workers, contract employees, interns, part time and outsourced labor will likely take the place of traditional employees to a lager extent during the coming jobless recovery than in the past.

What to do? That’s a topic for next time. But here are a few things to think about:

Be as independent as possible. Learn new skills that you can directly sell to your neighbors. Tax prep, computer repair, resume assistance, child/pet care are the kind of things that might not become a high paying career, but can generate income while waiting for traditional jobs.

Think about weathering the jobless recovery by learning sellable skills in a traditional school. There is always a need for people who know how to repair home necessities like plumbing, heating, and air conditioning.

Online schools are growing in popularity because students can attend class without leaving home. Very few online schools offer hands on training, such as HVAC, but there are plenty of other choices. There is a corresponding need for online teachers – if you have teaching experience, think about taking it online.

Or consider opening an internet business – anything that can be digitized can be sold on the net, and starting an online business is cheaper than it has ever has been. Creative hobbies like writing, music and photography are prime candidates for online sales. If you have a lot of something, like books, tools or cameras think about partnering with eBay or Amazon.com. It’s easy and very inexpensive.

Do something. Sitting around waiting for your old job to come back is the path to oblivion. You will have company if you take that route, but it will not lead to the place you want to go.

Vic Napier

References

BLS (7 August 2009). Economic News Releases. Employment Situation. Table A-12.  Alternative measures of labor underutilization. Available at http://www.bls.gov/news.release/empsit.t12.htm

Groshen, E. L., & Potter, S. (2003). Has structural change contributed to a jobless recovery? .[Electronic Version] Current Issues in Economics and Finance 9(8), 7 Available at: http://www.newyorkfed.org/research/current_issues/ci9-8.pdf