Changes in unemployment in the last several recessions have been less steep than in previous years but taken longer to rebound. This recession however, has led to steep declines in employment and yet appears positioned to take awhile to recover.
If the recessions of ’81, ’90, and ’01 are any indicator, we have a long, slow slog ahead of us. Re-employment may be one of the last stages of economic recovery, though for many, it is one of the most visible and tangible signs that all is not right. Thus, many investors and consumers will not feel as though we are out of the woods until they see the talented, experienced, hard working folks they know back at work at a compensation level commensurate with their skills (even if lower than before).
We have friends and clients in parts of the country (e.g. Michigan, rural Oregon, parts of urban New England, etc.) that have experienced slow (or no) economic growth and 10% unemployment for many years due to a wide variety of factors. In a sense, these (large) corners of America have been in a recessionary mode for quite awhile. Assuming that these regions are to some degree a microcosm of the larger situation, then one of the key questions on the table is how to ensure that 10% unemployment does not become a new norm for America.
As we have written in the past, we have to beware of several economic traps.
1. Distinguish patterns from rules.
Just because we have bounced back in employment in the past does not mean that we automatically will in the same way or same timeframe as in the past. We have to be very attentive to our policies and business practices to ensure that we create a climate conducive to job growth.
2. America is not inevitable.
The socio-politico-economic engine that drove economic growth in America this past century must evolve to stay vital and effective. There are developed countries in Europe that have become accustomed to high unemployment and the commensurate challenges. We need to learn from their challenges in order to prevent such a norm from developing here on a nationwide scale.
3. There are no silver bullets.
Some people are dismayed that government policies do not have all the answers, others are certain that they do, and still others are certain that they cannot. Some activists advocate pure free markets and others demand increased government intervention. Yet underlying much of those extreme views is a belief that there is a single method and economic philosophy that will win out. We do not think that is the case. It was a combination of policy and business failures that led us to this precarious position; it will be a combination of the two that (hopefully) leads us out.
The challenges before us are tremendous and unprecedented. Yet, at the same time, we remain one of the wealthiest nations in the history of the world in terms of resources, knowledge, technology, health care, equality of opportunity and potential for more of all of the above. That gives us a pretty good shot at moving forward as did those who came before us—despite the daunting challenges they faced.