Business Week. A jobless recovery? Not this time. We are at 5.8% unemployment now (below the 6.2% 20 year average) and the labor market is starting to tighten. Nice. This is clearly a combination of improved labor mobility (people and companies are able to find each other faster) and a faster corporate decision making process (companies reacted quicker to the downturn by cutting headcount and are ramping up as quickly given the recovery). Improved information flow at the heart of the new economy at work.
Here are the stats on the jobless rebound in the early 90's:
>>>A jobless recovery took place back then as the unemployment rate climbed long after the recession was over. Specifically, the jobless level was at 6.8% in March, 1991, when the recession officially ended and the cyclical upturn began. Unemployment dipped to 6.7% in April but then climbed to a peak of 7.8% in June, 1992. The rate didn't drop below 6.7% until November, 1993 -- nearly three years after the expansion started.<<<
This is what scares most people about the new economy (more than a flat market):
>>>Of course, there's the nagging fear that efficient machinery makes labor redundant in today's economy. Corporate America has invested enormous sums in sophisticated high-tech gear. Management also has demonstrated a ruthless drive to work remaining employees hard. Restructuring, reengineering, downsizing -- pick your favorite buzzword -- they're all permanent parts of management's toolkit. Still, in the second half of the 1990s, productivity ran at its highest level since the 1960s, and the unemployment rate dropped to its lowest level since John F. Kennedy was President.<<<
A productive economy doesn't obliterate the need for labor. In fact it does the opposite. Three reasons:
1) Countries with productive workers sell more products and services. Costs per unit decline, which enables price cuts that spur demand (the magic of a demand curve). Lower prices enhance global competitiveness. Greater sales increases the demand for labor.
2) Productive workers are paid more. Higher pay begets greater demand for a wide range of goods and services (many of which fall outside of the budgets for many Americans). In China, greater pay is helping a vast "bulge" of workers pass the threshold necessary to buy TVs and appliances. In the US, our bulge is moving into personal services, advanced education, and better medical care (all labor intensive industries that require local workers to deliver).
3) Productivity is a mind-set that spreads like a virus locally. This mind-set is a combination of discipline, training, and experience. It's about how to apply technology correctly, hire and train workers effectively, and restrain costs wisely. Productivity begets productivity across industries as workers shift and flow and information is exchanged. A pool of productive workers makes it easier to start new companies and influences the decisions by existing companies as to where they should base their operations. [John Robb's Radio Weblog]
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