[Most of the jobs that are safe would seem to be low-value-added occupations like car mechanic, restaurant worker, barber, etc. The jobs that earn -- or earned -- big bucks are in real peril. Here's the latest from mega-gloom-monger Stephen Roach of Morgan Stanley on the death spiral of the Great American Job Machine:]
... Forward-looking financial markets have long presumed that America’s backward-looking malaise is about to change — that hiring is just around the corner. The optimists have continually drawn encouragement from declining levels of jobless unemployment insurance claims, improved purchasing managers’ sentiment, and a pickup in employment as reflected in the so-called survey of households. It’s only a matter of time, goes the argument, before businesses resume hiring. After all, Corporate America is now making money again, and such sharply improved profitability is presumed to allow businesses to step up and deliver on job creation. Furthermore, hiring is widely thought to be on the other side of America’s latest productivity miracle; the argument in this instance is that there’s only so much that companies can get out of their workforces before they have to start adding headcount again. Yet we’re fully 25 months into recovery and it just isn’t happening. In my view, this is not a story of those ever-fickle lags. Something new and far more powerful appears to be at work.
The global labor arbitrage remains at the top of my list of possible explanations (see my October 6, 2003 essay in Investment Perspectives, “The Global Labor Arbitrage”). It depicts the interplay of two brand-new forces — offshore outsourcing in goods and services together with the advent of Internet-driven connectivity. Such IT-enabled outsourcing has taken on new urgency in today’s no-pricing-leverage climate of excess global capacity. The unrelenting push for cost control leaves return-driven US businesses with no choice other than to push the envelope on productivity solutions. The result may well be a new relationship between US aggregate demand and employment
The “imported productivity” provided by offshoring has become especially evident in IT-enabled services — where the knowledge-based output of a remote low-wage white-collar workforce now has real-time, e-based connectivity to production platforms in the developed world. One of the clearest examples of this is a significant shortfall of job creation in America’s IT and information services industry. In the upturn of the early 1990s, employment in this industry had increased nearly 4% by the 25th month of that recovery; by contrast, in the current cycle, such jobs are down over 1% — even though the US economy is far more IT-intensive today than it was back then. At the same time, knowledge professionals’ headcount in India’s IT sector has risen from 50,000 in 1990–91 to an estimated 625,000 workers in 2002–03.
I don’t think these trends are a coincidence. More likely than not, they are the flip sides of the same coin — a shift of comparable-quality labor input from the high-wage US services sector to the low-wage Indian services sector. And, of course, this trend is only the tip of a much bigger iceberg, as offshoring now spreads up the value chain to include professions such as engineering, design, and accounting, as well as lawyers, actuaries, doctors, and financial analysts. Long dubbed the “nontradables” sector, the IT-enabled globalization of services is now in the process of transforming this vast sector into yet another tradable segment of the US economy — posing a formidable challenge to the once unstoppable Great American Job Machine.
There can be no mistaking the important implications of this jobless recovery. Lacking in job creation as never before, it follows that there is equally profound shortfall of wage income generation. Normally, at this juncture in a US business cycle expansion, private wage and salary disbursements — fully 45% of total personal income and easily the largest component of household purchasing power — are up by 8% (in real terms). Yet 24 months into the current expansion, this key slice of income is actually down nearly 1% — the functional equivalent of about a $350 billion shortfall in real consumer purchasing power.
Lacking in such internally generated income, saving-short American consumers have had to draw support from secondary sources of purchasing power — namely massive tax cuts, an outsized build-up of debt, and the extraction of cash from over-valued assets such as homes. This is a tenuous foundation of support for any economy. It has led to subpar national saving, a record current-account gap, and sharply elevated household debt service burdens — a steep price to pay in order to fund the insatiable appetite of the American consumer. A persistence of this jobless recovery will only up the ante on these imbalances — raising serious questions about the ultimate sustainability of the current upturn, in my view. For a US-centric global economy, that’s an equally disconcerting risk. ...
<http://www.morganstanley.com/GEFdata/digests/latest-digest.html#anchor0>
Carl
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