Thursday, February 18, 2010

Lost Jobs Never To Return?

According to a story in last Friday's Wall Street Journal (click here for video report), economists expect that about 2.1 million of the jobs lost during the recession will never return.  This is a scary prediction for those who lost their jobs and expect to return to the workforce as the recovery begins.

Reasons given for the permanent loss of jobs included process improvements as well as increased offshoring implemented as a means of survival during the recession.

A Normal Process?

The loss of jobs has been a normal economic occurrence for many years, but the lost jobs are usually replaced by new jobs created in new or growing industries.  According to those surveyed, however, the severity and length of the recession has resulted in a loss of balance among job losses and job creation - meaning that, in this circumstance, job creation will greatly lag behind the job loss.

My Thoughts

I am a business consultant, not an economist, but I don't necessarily agree with the outlook given by many economists.  There has been so much doom and gloom reporting over the last couple of years that I believe a bandwagon effect has taken place.  It's much easier to report negative news than attempt to restore hope when things have been bad for so long.  I see a couple of factors that, under the right circumstances, can actually lead to significant job creation.

Onshoring, or moving offshore jobs back to the U.S., is gaining in popularity.  For quality and cost reasons, many companies are beginning to move jobs closer to where they can be effectively managed.  Also, when fuel prices rise again - which they ultimately will - the cost of transporting materials over long distances may offset the savings in labor costs.

Another factor that can increase onshoring (or decrease the motivation to offshore) is tax breaks for companies that create jobs for Americans.  In addition to reducing the cost of unemployment-related benefits, more American workers pay more U.S. taxes, which can help reduce the growing deficit.  Unfortunately, the U.S. government relies so heavily on corporate taxes that giving breaks to growing companies will delay recovery in corporate taxes collected.  Something like this may have to be done, however, in order to break the down cycle and discourage companies from further offshoring jobs.

1 comment:

Steve Amos said...

Your analysis is excellent. There is finally some opening up of the job market in the weeks since you have printed this.

More jobs are being advertised, and most people I know who have been looking a while are reporting additional interest. I have had three recruiters call unapplied for, and a couple interviews. My inbox has jobs directed to me.

We may beginning to see the start of some jobs. The bad news here in CA is we have not seen blue collar jobs yet.