Lost Generations

http://www.nytimes.com/2010/07/09/business/economy/09shop.html?emc=eta1

http://www.nytimes.com/2010/07/07/business/economy/07generation.html?emc=eta1

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"The measure of a great teacher isn't what he or she knows; it's what the STUDENTS know!"
(John C. Maxwell)

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It's good to watch the retail sales numbers if one is interested in where the economy is going and we're going to defer here to those economists who do that professionally, but here's a thought or two. First, how could any retail numbers be "good" if we still have 15 million (nominally) unemployed and an effective unemployment rate of 17%? Whatever the "numbers" are, they're certainly not as good as they could be from the point of view of "consumer demand!" Who's the "consumer?"

Second, it is interesting to look at where the numbers are "up." Costco Wholesale reported revenue gains but those were fueled by its international business. Limited Brands, which owns Victoria Secret, was also a bright spot. But, overall, discounting was heavier than expected just to get customer volume. That's not a good sign.

We have, for most of the last ten years, referred to the 40 to 55 year old old population cohort as a "lost generation:" specifically, the portion of that population that was "replaceable." For example, the tens of thousands of auto workers who were laid off because we couldn't make cars as well as our overseas competition. This is the sub-group that could be replaced by automation or overseas workers.

Who speaks for them?

Today's Times has an article (attached) by Louis Uchitelle ("American Dream Is Elusive For A New Generation": we've had to correct the grammar in the title - nobody says the Times is perfect) on the new generation we're losing to a disastrous job creation environment. Uchitelle has written extensively and brilliantly over the past decade on unemployment, and he has done so again today.

The percentage of young Americans (18 to 29 year olds) who are either unemployed or not seeking work is at its highest since 1971. The graphic from the Times article shows the real unemployment rate for that group pushing 40%. Then, we have the 20 to 34 year old group pushing 20% plus a growing portion of that population in "multi-generational households" (that's a fancy sociological term for: "moved back in with the parents").

So, the "millennials" (18 to 29 year olds) are graduating into a situation where the jobs are just not there. The real unemployment rate for them (37%) resembles the 1930s and, since they are our future, the issue is what to do about it?

Congress has an answer: cut back on government spending so that we can reduce the "deficit". We won't go into the fact that this century began with a "surplus", or why there is a deficit now. We will point out, as we and others have before, that not enough money has been spent to "prime the economic pump" (we've altered a very old saying) and Congress is now leading the charge to cut back on "spending" when we haven't spent enough (see Krugman and Buffet, and see the Great Depression for lessons in this area). Spending by government and private enterprise encourages job creation. Those who have jobs pay taxes and taxes help to reduce deficits. These are simple economic principles which seem to elude many elected representatives.

In a very telling reference to Glen Elder's (University of North Carolina) study, "Children of the Great Depression," Uchitelle points out that the Great Depression damaged the self-confidence of the young, and that is beginning to happen now. This generation is now growingly "risk averse" and it is hard to blame them.

Who speaks for the millennials, or for everybody under 40 years of age?

We encourage those we encounter to continue to get more advanced degrees in order to stay out of the "storm" until it blows over. That's a good idea and may, in turn, cause some students to get PhDs who otherwise would not have. That, in turn, will help to up-grade college education, management consulting and other professions.

The cycle for petroleum engineers is similar economically. There is a shortage right now of that professional group because of downturns and layoffs 20 years ago. Now, the oil business is facing a generation coming up for retirement and nowhere near enough people to replace them. Petroleum engineers can make significant salaries after graduating and there aren't enough degree granting schools.

In a poor economy, students have to target positions at profit/non-profit institutions that continue to grow, or have shortages of certain skills.

We hope the economy is coming back but the most optimistic forecasts we see are for a long slow recovery (like 2.7% GDP growth for the first half of 2010, and 2.5% GDP growth for the second half). If that means things will be staying the way they are now, then we're going to be losing another generation.

The best case scenario, and provable mathematically, is the anticipated major drop in "baby boom" generation employment from retirement. If true, within the next ten years, there will be "shortages" of people to fill jobs that will approach a "full employment" scenario and will have a dramatically positive impact on immigration policies. Demographically, there is "hope."

We choose hope.