Jobenomics

Goal: Creating 20 Million Jobs By 2020

Jobenomics - Goal: Creating 20 Million Jobs By 2020

Small Business: The New “Big Dog”

Historically, the main driving force of the US economy has been the goods-producing sector with manufacturing (mainly automotive) and construction (mainly housing) being the “big dogs”.  These big dogs have huge tails that influence many other industries in their direct and indirect supply chains during both upward and downward economic trends.  Consequently, most decision-makers focus on these big dogs as opposed to their purported tails—small business.   From a Jobenomics perspective, small business has evolved to become the new big dog and will remain so, at least for the remainder of this decade.

 

Over the last thirty years, goods-producing industries have declined 25%, where service-providing industries, mainly small business, have increased 81% (see Jobenomics blog entitled, 30-Year US Employment Trends).  Today, according to the US Bureau of Labor Statistics, US manufacturing employs 11.8 million and construction 5.5 million, which is 3.8% and 1.8% of the US population (312 million).  On the other hand, service-providing industries employ 91.6 million or 29.4% of the US population.  Of this 91.6 million, 77.4 million or 85% are small businesses of which 55% (42.9 million) are very small businesses with less than 50 employees (source: ADP).   Based on these numbers, very small business is the big dog now.

 

The question for policy-makers, decision-leaders, talking-heads and all-Americans is whether this new big dog can survive without the former big dogs.  The answer is probably not. However, the question should not be an either/or question.  America needs all its dogs in the economic fight.  Americans need to focus on small business as the new economic champion giving old dogs time to heal, grow and effectively compete again.

 

The biggest reason that small business can compete globally is largely due to technology.  Small information, technical, financial, professional and trade service firms can now compete globally due to broadband communication and advanced information technology systems.  Collectively, little has become big.  77.4 million service-providing, small business employees make it so.

Economic Recovery Scenarios

There is much debate among economists and policymakers about the shape of the US recovery.  From a Jobenomics perspective, there are three scenarios: V, W, and L or declining-L.

 

V-Shaped Scenario.  The V-shaped scenario is the predominant historical scenario.  The premise of a V-shaped recovery is that the market rebounds after hitting bottom, and returns to or exceeds previous highs.  Eight out of the nine recessions that the US has experienced since WWII have been V-shaped recoveries.

 

Due to rebounding US stock markets (Dow, S&P and NASDAQ), policymakers tout the V as proof that recovery is underway, and that government stimulus packages are working.  Economists further argue that the normal business cycles are a series of peaks and troughs.  Recessions (troughs) are distinctly shallower, briefer, and less frequent than expansions (peaks).  Since the US economy is still the largest and most powerful in the world, Americans should expect a peak greater than before.  While the current recession (aka, The Great Recession) has been bad, our current economic balance sheet is no worse than it was a decade ago.

 

W-Shaped or Double-Dip Scenario.  The W-shaped scenario happened during the 1975 to 1982 recessionary era.  It also happened during the Great Depression.  The premise is the market rebounds, then decreases, and rebounds again returning to historic highs.  The W is a double V, also known as a double-dip recession.  After a false start, optimism returns to the marketplace.  Past W-shaped scenarios were largely caused by excessive or inappropriate government policies and intervention.  A future double-dip recession could be induced by another domestic financial crisis or an international event.

 

L- or Declining-L Shaped Scenario. The L-shaped scenario has not happened in recent US history, but has occurred numerous times in other countries, like Japan and Greece.  The L-shaped recovery premise is that the market does not rebound, or takes a significant amount of time before it rebounds.  The “declining” L postulates that the economy erodes, and in extreme cases, collapses.  The square root symbol is a third variant, where the recovery dips, recovers slightly (due to stimuli), and then flattens.  Economists who believe that the current economic crisis has been caused by flawed economic principles endorse the L.  Numerous anti-capitalists also ascribe to this point of view since they believe that the American-era is over, and is in decline.  Even V and W advocates acknowledge that multiple crises, or a catastrophic event, could cause an L, or even a declining L, depending on the severity of the crisis or event.

 

A reasonable case can be made for each scenario, which implies that there is 2/3 chance that the US economy will get worse in 2012.  This reflects the dour mood of Americans, who by a 2/3 margin believe that the US economy is moving in the wrong direction.  It is the author’s opinion that the US economy will continue to struggle with low GDP and high unemployment rates, but will eventually recover if there are no major crises.  However, this is a very large “if”.   Dark clouds are on the horizon.  These clouds include a deadlocked political environment in Washington, eurozone crisis , conflict with Iran, a massive energy crisis ($300 barrel of oil), a second major real estate crisis, layoffs by state and local governments, terrorist (cyber, or physical) attacks, civil unrest, or an unanticipated “black swan” event.

 

Consequently, if American leadership (Bernanke, Geithner, Obama and Congressional leaders) make the right monetary (the Fed) and fiscal (the Congress) decisions, our economy shouldslowly recover (V-shaped recovery).  If a financial, manmade, or natural crisis occurs, America is likely to suffer a
double dip (W) recession that will lead to economic malaise and higher unemployment rates.  If multiple crises occur, the US economy could enter a prolonged era of recession (L), or depression (declining-L), which is an increasingly likely prospect for the eurozone.  2012 will certainly be a pivotal year for America and the other Western economies.

 

 

Too Few Pay for Too Many

Too few pay for too many

 

Not counting government and government contract employees, 96 million are employed in the civilian workforce.  This workforce is financially responsible for 213 million people (178M non-working and 35M government) who depend on familial, government or retirement income.  Historically, families took care of families, but times have changed.  Nuclear families no longer represent the dominant American household.  Public assistance now often fills the gap.   Public assistance and public service have grown to unsustainable numbers.

  • 51 million people receive Social Security payments.
  • 45 million are Medicare beneficiaries.
  • 59 million receive some form of Medicaid.
  • 44 million receive food stamps monthly
  • 37 million fall below the poverty level.
  • 26 million are unemployed.

 

 

 

 

Business Emphasis

Business Emphasis

 

From a Jobenomics perspective, America needs to commence the 20 by 20 campaign by changing our negative attitude towards business.  At best, Americans have become ambivalent towards business.  Business is taken for granted.  It is often looked upon as a necessary evil, as opposed to an honorable pursuit.  Anti-business sentiment is pervasive with its epicenter emanating from Washington.  Anti-business sentiment causes big businesses to be cautious, limit hiring, close operations, and outsource overseas.  Anti-business sentiment encourages small business to go out of business, limit hiring, and defer from starting new enterprises.  Equally important, anti-business sentiment discourages business investment which is needed to start new enterprises and grow existing businesses.

 

There is an old adage that states there are three ways to make money: (1) by your own hands, (2) by someone else’s hands, and (3) by making money-on-money.  Over the last three decades, making money-on-money became the first choice of Americans from Wall Street, to Main Street, and even to Washington.  Wall Street over-leveraged exotic financial instruments.  Main Street over-extended itself by buying oversized homes, investing in the stock markets and 401Ks, and maxing out credit.  Washington not only let this happen, but jumped in and became the largest trader of mortgage-backed securities on the global secondary market.

 

By turning to speculating and investing, America neglected producing and manufacturing.  As a result, over the last three decades, America deteriorated from the greatest creditor nation in the world, to the largest debtor nation in the world.

 

The recent economic crisis serves as a wake-up call.  Unfortunately, Americans are turning to government, rather than business, for rescue.  Government emphasis is overwhelmingly on the unemployed.  To make matters more precarious, anti-business government policies will hasten further decline in private sector employment.

 

 

The Solution

The Solution

 

The only meaningful way to fix the American economy involves the economics of jobs and revenue creation—jobenomics.

 

In order to achieve economic security, America needs to create the number of jobs that we did in the 1970s, 1980s and 1990s.  The US economy cannot afford another decade of negative jobs growth, as occurred in the 2000s.  20 million new private sector jobs are needed by 2020 (20 by 20).  Jobenomics is essential to achieve the goal of 20 by 20 in order to preserve our way of life and the American dream.

20 million is the minimum number, since it will provide the number of new jobs required for new workers entering the work force (approximately 16 million) and about half the workers (4 million) who lost their jobs during the Great Recession.  20 million new jobs will produce the tax revenue to keep America’s economic engine running.  Creating hundreds of thousands of new jobs is not enough.  167,000 new private sector jobs per month are needed to achieve the 20 by 20 goal.

 

American innovation, ingenuity and entrepreneurship are the keys to a prosperous future where everyone who wants to work can find a job.  20 million jobs by 2020 is a realistic goal, if American leaders get behind the concept and generate public support for such a campaign.  Jobenomics outlines a potential structure for such a campaign, as well as a framework for developing an austerity plan in the event that unwanted or unanticipated crises interfere with the jobs creation process.

 

 

The Problem

The Problem

 

America is undergoing a stealth employment crisis—yes, employment rather than unemployment.  Of the two crises, the employment crisis is far more important to resolve.

 

US private sector employment is collapsing at a greater rate than most people realize.  Of the 96 million, 83% are employed with service-providing industries, and 17% are in goods-producing industries (manufacturing 11%, construction 5%, and 1% mining/logging).  As a percentage of the total population, the total private sector workforce declined 13.7% in the last decade.  In addition to the 96 million employed in the industrial sector, approximately 2 million are employed in the agricultural sector, which is now less than 1% of our total population.

 

The US used to be the greatest manufacturing country on earth.  As a percentage of the total population, US manufacturing has declined 55% in the last three decades.  During the 2008-2009 Great Recession, manufacturing lost 5.6 million of the total 8.4 million job losses.

 

In the 19th century, agriculture was America’s dominant form of employment.  In the mid 20th century, US manufacturing provided of 1/3 of all jobs in the US.  Today, agriculture and manufacturing represent less than 5% our population for a total of only 14 out 309 million citizens. These trends cannot continue if the US wants to recover economically and return to prosperity.  It is imperative that we stop any further decline in these critically important areas.  Unfortunately, it will be difficult to significantly increase domestic agricultural and industrial employment.  Therefore, America must look to the next generation of jobs, which will be predominantly information-age jobs with emphasis on small business in the services-providing sector.

 

Jobenomics 20 by 20 Campaign Plan

Jobenomics’ Plan for America has prescriptions for small, large, foreign and emerging technology jobs creation concepts and initiatives.  After sixty years of growth in America, jobs creation stopped.  The American economic engine lost almost a million private sector jobs in the last decade, compared to gains of 10 to 20 million new jobs in previous decades.  To get our economic engine running again, America needs to create a minimum of 20 million new private sector jobs by 2020 (20 by 20).  Jobenomics “20 by 20” Campaign is comprised of four business categories: Small & Self-Employed, Large, Foreign and Energy Technology Revolution.   The Small & Self-Employed Business category is largest with a goal of 10 million new private sector jobs by 2020.   The 20 by 20 goal for government is zero job growth.  Considering state budget crises, this goal should be relatively easy, since the bulk of government jobs are in state and local governments.  If the federal government imposed a no-growth policy, the total tax burden of government jobs could be reduced.