Bloomberg does a really great job on presenting the details behind the October 2013 jobs report. While the 200,000 new jobs were created is much better it is still a far 300,000-400,000 that were really the norm in the ’90s and mid ’00s. At the same point though the workplace participation rate is at an all time low. If you go to slide 4 it really shows you where with each major decline in the past 20 years we lose a huge amount of manufacturing jobs that never really return. This can be attributed to the concept of having to do more with less leads to seeking new locations with cheaper labour, labour arbitrage. Historically because of the large numbers of manufacturing workers this meant significant savings to the companies bottom. Over 6 million manufacturing jobs have not returned after economic downturns. As fewer opportunities for manufacturing outsourcing are left in the past 10 years you have seen an increase in this effect hitting the IT, Finance and Professional services sectors. Then there are those jobs that you can not really outsource health, education and leisure. All of these have a natural requirement of remaining local thus they either never really lose jobs, such as health and education, or leisure, which recovers very quickly.
In addition to their being fewer jobs the jobs that are growing end up either being highly specialized, such as health, or low wage jobs with very little specialization such as leisure. This creates a severely separating class structure where those that can not afford, either with time or money, to retrain end up in low wage positions even if they are over educated for those roles.
I personally remember the mid ’80s when IBM laid off a lot of people and there were stories of guys with 30 years in engineering with a PHD flipping burgers at McDonalds. Surely there is an upside. Well if time has taught us anything it is the American people are resilient. The IBM case is interesting because it is largely what led to the expansion of the PC market in mid ’90s. While it was the image of the 20 something that made crazy money from the dot com boom in the late 90s it was really kicked off by the 7-9 years before with building of several tech companies like Cisco, AOL, PSINet, UUNET and others that were really the early adopters of connected communications that we now know as the Internet.
In short we will survive and we will be stronger for it. Keep an eye out for 3D printing, adaptive manufacturing and robotics; this is going to change everything on the labour arbitrage equation.