by: Todd Wheatley
(c) IQ-2k   11-05-09

Forty years ago inflation was all the news. Today it's the ailing economy and unemployment. Wars, not withstanding. Oh yeah, and if you are thinking about the health care debate - don't - it will never pass; The issue that congress and the president should have stayed focused on is JOBS!!! Though it would have been supremely satisfying to see Wall Street cleaned up. But NO!! The president had to visit every country under the sun and congress was dumb enough to embark on health care along with "cap & trade".

Whatever ... forty years ago the Nixon Administration failed on inflation ... as did Ford and Carter. In fact the problem went on for so long that a new word was added to the lexicon : STAGFLATION. Finally in 1984 it was "morning in America". Unemployment had peaked in 1982 (which was tied today) and the inflation had broke at the start of the modern-day boom/bust cycle. The Reagan Administration and Ronald Reagan, in particular, received accolade on par with deification. Perhaps the full breadth of praise was undeserved, but a very deep recession had been reversed. At any rate President Reagan's detractors would be far, far, fewer than those for the depression era FDR presidency. Oddly the leadership styles of the two presidents were very similar, but their views were diametrically opposed. Nevertheless, FDR was faced with an economic situation that made the late 70s stagflation look like grade school play time.

It is reported that at the height of the Great Depression 25% of the U.S. workforce was unemployed. But even more remarkable, that statistic fails to account for the cultural norm of the time. Namely, that men were the sole bread winners of the household. Consequently, while 25% of the "workforce" was unemployed, 50% or more of the population was affected. With no social safety net untold thousands stood in soup lines waiting for meals. Tent cities and shanty towns sprang up across the country. Then to add insult to misery ... the Dust Bowl.

Today the "two-income" household is the norm so the current 10% unemployment rate does not double in effect as it did during the Depression Era. Certainly the "Great Recession" has been hard though it could have been much worse. Fortunately safeguards enacted during the FDR Administration kept the current crisis from rising to the point of depression. Key among the safeguards is the FDIC insurance program. There have been no "runs on the bank". Additionally, unemployment insurance along with social security has kept millions of households afloat. Yet a great many still demonize the late President. Arguably growing the size of government failed to save many during Roosevelt's time, but most assuredly it saved the nation in our time.

Today the nominal unemployment rate rose to 10.2%, but the structural unemployment rate (one that counts people whose benefits have run out) is closer to 12%. A further 15% remain underemployed. Moreover the national average work week is reported to be 33 hours. Surprisingly the GDP jumped into positive territory last quarter leading many to announce that the recession is over.

Oh joy -- a JOBLESS RECOVERY.

So let's assume, that as a lagging indicator, jobs will begin to return with the up tick in economic activity. What about "personal income"? I believe that like the tech crash most of the high paying jobs will be replaced with lower wage jobs resulting in a lowering of personal income. Manufacturing jobs are likely gone for good and the higher paying finance and real estate jobs will take years to recover if ever.

The U.S. economic engine needs a boost. The technology sector, however, is maturing and becoming less lucrative. The energy market is becoming "sticky" and the one thing we build better than anyone is weapons. So do we stick with fossil fuels and watch our labor force wither away? Do we let countries like China and India overtake technology as well as manufacturing? Or do we set a course that will revitalize wages, innovation, and global leadership?

"Green Technology" is the answer.

As the world's greatest economy our accumulated wealth will sustain an aging workforce for the foreseeable future. But Five to ten years out shifting demographics will create social tensions. So unless and until the recovery starts to re-employ the nations workforce stress will mount potentially leading to violence. Though in the long run more than just jobs will be needed. We will need middle income jobs to help balance social pressures. Fortunately a "double-dip recession" looks unlikely therefore jobs should be on the way.


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