The U.S. job market's sluggish pace of recovery has kept many workers jobless and discouraged, and now many feel advancements in technology and globalization will hurt U.S. job growth.
The U.S. Department of Labor reported earlier this month that the country's unemployment rate in April rose to 9.0% from 8.8%. Employment in more than a dozen sectors hit four-year lows in April, and another 10 have gained little since hitting lows in the beginning of this year.
But it's not just a slow economic recovery that is leaving people unemployed. The U.S. job market is changing, as companies find ways to function with fewer workers and some shift operations overseas.
More than 13 million people are searching for work, and even though U.S. companies have collected about $940 billion since the credit crisis, many aren't hiring.
Most prefer to spend in other ways, creating a wide gap between capital spending and employment. Corporate investment will climb 11% this year while employment only rises 1.7%, according to a Bank of America Merrill Lynch report.
The report states inventory rebuilding, low borrowing costs, and tax breaks for equipment buying are encouraging companies to spend, not hire.
And some that are adding workers have turned to temporary staffing for flexibility in employment.
"This is the new face of labor," Neil Alexander, from the labor law firm Littler Mendelson, told MarketWatch. "We have large clients that have laid off hundreds, thousands of employees. They are now using a large chunk of temp workers, managing their labor needs in real time. It's cost containment."
Another factor to high unemployment is that the U.S. job market is changing its structure and needs. Even as U.S. manufacturing has started to pick up in recent months, jobs in that sector have not followed suit because companies are using newer technology that allows them to get done the same amount of work or more without hiring as many people.
Manufacturers of nondurable goods lost about 600,000 jobs during the recession and have only brought back about 20,000 of those positions since January of this year.
"Those jobs are not likely to come back," Mark Vitner, senior economist with Wells Fargo Securities, told CNNMoney. "Those plants are so automated, you have to increase output an awful lot to create very many jobs."
Software maker Oracle Corp. (Nasdaq: ORCL) and Cisco Systems Inc. (Nasdaq: CSCO) both added about twice as many workers overseas over the past five years as they have in the United States. General Electric Co. (NYSE: GE) now has about 54% of its workforce abroad.
A big reason for the shift is growing demand for products and services in emerging markets.
"It's time to own up to the fact that the United States is no longer the world's growth engine," said Money Morning Contributing Editor Shah Gilani. "Developing countries and economies have now assumed that mantle. There's still demand for U.S. goods and services overseas, but it's a lot more efficient to manufacture in those markets where you are selling products."
Now some analysts wonder if the United States has lost its appeal as a place for multinationals to invest in employment.
"It's definitely something to worry about," economist Matthew Slaughter told The Wall Street Journal.
This prompted last week's Money Morning "Question of the Week": Are you confident in your financial game plan? Do you feel you/your household is well prepared for a weak economy? What is your biggest concern about how your financial plan could fail? How have you adjusted it recently to account for changes in the economy?
The following collection of reader comments highlights the biggest concerns over U.S. job growth.
A Cost-Cutting Movement
Economists fail to realize the extent to which advancing technology and globalization are contributing to unemployment. While we all wait for the economy and job market to recover, businesses are going to continue to automate and offshore jobs as they continue to cut costs.
I do not think that we will see real improvement in the economy until we see sustainable job growth. Recently the number of jobs created has been running around 200,000 a month. The GDP report that just came out recently was only 2%; this is not nearly high enough to sustain employment growth of 200,000 a month. Another factor holding things back is stagnation of wages and benefits. This is good for business owners, but terrible news for workers.
-- James M.
This Is Not Your Father's Job Market
I think some industries, although I don't know which ones exactly, are never going to be the same in the United States, which is why people study different things than our parents did in college these days. Anyone I know who grew up with a father with a blue-collar job probably couldn't find that same job anymore, in some cases. So I went the computer route in school, knowing technology would be a key part to me keeping a career going.
I just hope the United States can revive some industries or create new ones that have roots here and not be trumped by a foreign workforce. I don't want my kids to constantly have to worry about what they will do for money. I hope they can find a way to combine a passion and a paycheck, without having to go overseas to find it.
-- Andrew B.
Best Jobs Overseas
I took an early retirement with a generous severance package three years ago because my job was looking shaky. I have not been sorry, and my wife and I just moved to Ecuador to take advantage of a lower cost of living and a great climate. However, our two sons are looking at options, and I hope they are able to make things work. One of them is a senior in college, and the other graduated last spring and is working on a one-year internship, which he thinks will lead to a good job. In the meanwhile, he is making enough to support himself, which is a nice baseline to start from.
If the economy can continue to grow, then I think they will do fine, but I suspect that we have some serious rough spots ahead. I just hope that they have the skills that they need to cope. The senior in college thinks that he might well like to work outside the United States for a while upon graduation, and I have not discouraged him. I am sorry to say that I think that the best opportunities throughout his working career are likely to be in the developing world, rather than in the USA.
-- Gordon F.
The Tech Factor
Have you considered the impact that robots, AI and other automation technologies are likely to have on the job market and economy in the coming years?
I have read an important new book on this subject. The book argues that as technology accelerates, machines and computers will be able to do more and more routine jobs, and structural unemployment and increased concentration of income may well be the result. In particular it suggests that automation will soon have a big impact not just in manufacturing, but also in the service sector and in knowledge-based occupations: "The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future."
The author believes that the impact of technology on the job market will be among the most critical issues we will have to face as a society in the coming years and decades. This is a subject that, given the current economic situation, would be of great interest to your readers.
-- Jennifer L.
What's Real Unemployment, Anyway?
Are U.S. employment numbers even "real," or just smoke and mirrors?
I wonder how many of the recent 69,000 in unemployment claims reduction were real jobs? How many of them were people who no longer qualify for support due to being long-term unemployed? And of the ones that were "real" jobs, how many of them were full time positions? Or were those numbers dominated by an increase in the numbers of "underemployed"?
-- Jimmy D.
Be sure to answer next week's question: Are you confident in your financial game plan? Do you feel you/your household is well prepared for a weak economy? What is your biggest concern about how your financial plan could fail? How have you adjusted it recently to account for changes in the economy?
Send your answers to firstname.lastname@example.org.!
Is there a topic you want to see covered as a "Question of the Week" feature? Then let us know by e-mailing Money Morning at email@example.com. Make sure to reference "question of the week suggestion" in the subject line. We reserve the right to edit responses for length, grammar and clarity.
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News and Related Story Links:
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- The Wall Street Journal:
Big U.S. Firms Shift Hiring Abroad
- Money Morning News Archive:
Question of the Week Feature