Friday, January 1, 2010

Opinion of the Day

What will we learn from this economic recession?
By Bob Young

This has been one heck of a roller-coaster year from an economics standpoint. From the market crash in the spring to continued hemorrhaging of jobs, from pumping hundreds of billions of taxpayer dollars into the banking system to statements that the recession was over, we certainly have had our ups and downs. It does appear that the general economy has begun to turnaround and show signs of growth. The consumer is starting to reemerge, but is being very cautious.

Export numbers are surging as the dollar continues to weaken. Housing prices appear to have found their nadir and the day may come next spring when we actually need construction workers again. It is on the jobs front that one has to have the greatest concern. Since the peak in December 2007, the nation has lost 7.3 million non-farm jobs, roughly the same level we had in January 1999. In other words, we have essentially the same number of jobs in place today as we had 10 years ago. This recession has wiped out an entire decade of economic growth. And we are not done yet. We will likely continue to lose jobs for at least a few more months, possibly into the middle of 2010.

Looking back, we used to go through cycles on a frequent basis, losing jobs today only to add them back quickly when the downturn was over. In the 2000-2001 down turn, however, it took three years to get back to the same number of jobs that existed before things turned south. Coming out of this downturn, it may well be four or five years before we get back to those December 2007 numbers. Companies are going to want to be sure the revenues
are there, that they can afford to bring on new workers, before we see much in the way of job growth.

As we come out of 2009, some of those signs are beginning to filter out. The Standard & Poor’s 500-stock index reported operating earnings per share are nearly back to the long-term trend. Corporate investments the last several months have been up sharply as companies are reinvesting in equipment, computers and other tools to help boost current worker productivity instead of adding new workers. In short, they are going to try to go as long as possible before jumping back into the jobs market.

One of the most important conversations we should be having in Congress at this point is how we get government out of the way of job creation in the private sector. Stimulus monies were needed and can help in the short run. But there need to be fundamental conversations about how we educate our workforce, about how we hold on to and expand our manufacturing base and about how we get people used to the idea of work again.We will come out of this downturn. By many measures, we already have. By the measures that count most to people, however—Bob Young is the American Farm Bureau Federation’s chief economist.

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