As I See It: The Great American Recovery
November 9, 2009 Victor Rozek
How kindly the new year will treat IT professionals depends on the elusive recovery. But did we have one or didn’t we? Unlike experiencing a migraine, you can actually be in the middle of a recovery and apparently not even know it. Just ask the 15.7 million people looking for work, and the millions more who stopped looking. A jobless recovery they’re calling it, which is like a joyless orgasm. Whoop-tee-do.
The term “jobless recovery” is a telling oxymoron. It is a measure of the contempt in which the elites hold the rest of us. Once the banks and brokerage houses were made whole, the recovery was deemed complete. Whether the issue is jobs, or pensions, or healthcare, it’s a phenomenon increasingly evident in the attitudes of policy makers and their grasping sponsors: They love the country, but hate its people.
Since most of us could care less if Goldman Sachs fails, much less if its executives get bonuses, let’s take a look at the recovery using the measure that is most meaningful to the men and women on the street–the availability of jobs. President Obama claims that his trillion dollar gift baskets have produced new jobs, and economists point at declining unemployment rolls as proof that the worst is over. But never mind that the number of applicants seeking unemployment benefits has dropped slightly. That statistic is like the magician’s scantily clad assistant, whose function is to be a distraction. Overall, unemployment is “officially” at 10.2 percent (as of last Friday with the October jobs report from the U.S. Bureau of Labor Statistics), with double digit unemployment in 139 metropolitan areas. A true recovery would return unemployment to pre-recession levels that hovered around 5 percent–a number traditionally equated with full employment.
But consider what would actually have to happen in order to achieve nickel unemployment.
Assume there are about 130 million jobs in the land of the free, and some 20 million people serious about finding one. Working against them is not only policy but population. Each year the country adds about 1.5 million new job seekers through graduation, immigration, and folks crawling under the fence. Which means that the economy has to grow at over 1 percent just to keep up with population growth. The economy would absolutely have to boom in order to accommodate both the current pool of unemployed workers plus the newbies waiting to get their feet wet.
But is the economy actually growing jobs? There are temporary anomalies such as rebounding car and home sales. But those recoveries are artificial, fueled by massive government subsidies (cash for clunkers, and $8,000 tax credits for first time home buyers). When the financial incentives are gone, so are the buyers; and when buyers disappear, jobs follow. We’ve lost 7.3 million jobs since the recession started in December 2007, with more to come. So let’s close our eyes, cross our fingers, wish real hard, and maybe the economy will do an about face and begin growing. What then? A 3 percent annual growth rate would create about 3.9 million new jobs, which would be grander than Obama’s rhetoric, except that 40 percent of those jobs would just allow us to keep pace with population growth. So only the remaining 2.4 million new jobs would go toward reducing unemployment. At that rate how long would it take to restore unemployment to pre-recession levels?
Rutgers University economists Joseph Seneca and James Hughes got out their calculators and discovered that 20 million (unemployed) divided by 2.4 million (new jobs) equals a little more than 8.3 (years). By these estimates, we can expect full employment again in 2017! Well, if the world doesn’t end in 2012, as the Maya predicted, it’s something to look forward to.
That’s assuming the economy grows for nearly a decade at a steady 3 percent. Here are some realities that could get in the way: A huge and growing national debt. An $8.1 trillion decline in North American financial assets during 2008. Eight years of mostly off-the-books wars with no end in sight. Immense budget and trade deficits. A Social Security fund that has been looted as Boomers begin retiring in great numbers. Out of control healthcare costs. Worrisomely underfunded private and public pension funds. Bankrupt cities and insolvent states that will be forced to raise taxes. Rising credit card defaults. And a lack of meaningful financial system reform, guaranteed by the $224 million the banking industry spent lobbying this year alone. That’s $418,691 and change for every member of Congress, and you can bet the banks are not demanding stricter regulations.
In the words of reformed options trader Max Keiser: “The bankers on Wall Street are the equivalent of suicide bombers in other countries. They threaten to blow themselves up and blow the economy up in exchange for huge bailout money.” Which just shows that Americans are more practical than your garden variety terrorist; they can be bought for cash, no virgins necessary.
Standing against this onslaught of corruption-fed inertia is the resourcefulness of the American people, and the state of California. It is impossible to definitively predict what inventions and technologies will fuel the next industrial revolution, only that they will come; and odds are they will come from the once Golden State. Bigger than Russia, badder than Brazil; if California was a nation it would have the 8th biggest gross domestic product in the world.
Here are some stats courtesy of Time magazine. California boasts 38 percent of the nation’s solar-energy patent registrations, and 40 percent of all solar installations. The state leads the nation in green automotive technology. Last year, 43 percent of all U.S. venture capital was invested in the San Francisco Bay Area. The co-founder of Sun Microsystems, Vinod Khosla, raised $1.1 billion for development of clean energy. ExxonMobil and La Jolla-based Synthetic Genomics are kicking in $600 million to develop fuel from algae. There are over 500 biotech firms in San Diego alone, and don’t forget the nation’s inventive wellspring, Silicon Valley. The future promises to be bright, green, and innovative.
Great inventions, like grand ideas, move the world forward. Railroads, television, airplanes, transistors, computers, satellites, space travel, microchips, cell phones. The reality is, a great many folks entering the workforce will work at jobs that don’t yet exist in industries that have yet to be invented. Look what the Internet did for IT. Computers remain the central, indispensable element of modern life. That will not change any time soon.
If the recovery is going to be more than a banker’s night out, it will have to produce jobs. Technological breakthroughs and innovations cannot be scheduled, but clearly the search for clean, sustainable energy has become a national priority, and its creation, distribution, and application will infect every sector of the economy.
For the short term, the task of the IT professional is to hang in, hang on, and invest in yourself if you need to upgrade your skills. The opportunities will come. Biotech, nanotechnology, expanding broadband, clean energy, biometric security, e-commerce, 3D Internet, bio-computing; all of it requires mountains of software. From creating applications that can spot faces, to applications that can interpret spots in the distant universe, IT professionals will continue to form the hub of the economic wheel.
David Korten observed that Wall Street has become the operating system of the economy. But, as we have seen, it’s a system that transforms real wealth, such as home values and 401(k)s, into delusory wealth, like hedge funds and derivatives. One thing I know with absolute certainty: When the history of our times is recorded, the programmer will have written more of it than the investment banker; the hardware engineer more than the stock broker.
In many respects, IT professionals do more for economic development than Wall Street illusionists. Their work is anonymous and under-appreciated, but it is no less meritorious for that. Except for the work of guys who write software for Wall Street. In the words of that noted philosopher Ricky Ricardo, they have some splain’n to do.