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Friday, April 16, 2010

Demographics Will Save This Job Market

As usual the headlines on the job market are dire. News agency after news agency reported that "March job losses were 61% higher than February." Surely all signs point to a slow recovery for jobs in the near term, but long-term the outlook is outstanding. Here's the rest of the story.

March job losses were sharply higher than February's because February's 40,090 jobs lost was the lowest in four years. March's 67,611 was not great news, but let's dissect that further. First of all it was 55% lower than March 2009's 181,183 jobs lost. Now of that 67,611, 50,604 were government job cuts announced in prior months and finally implemented. The media got to count these twice as bad news: once months ago when the various federal, state and local entities announced the cut and again in March when they happened. Furthermore of these 50,604, just over 30,000of those are at the U.S. Postal service.

So take out the USPS and the governmental sector cut 20,000 or so jobs and the private sector shed just over 17,000. Those are remarkably good numbers.

This opinion is born out by the quarterly job losses for Q1 this year (181,183) vs. last year (578,510). That's a 69% reduction, not that any media outlet will quote that. Good news doesn't sell soap.

So in the short-term the job market appears to have bottomed out and is beginning to recover. What about the long-term?

I read some interesting material this week hinting at a labor shortage beginning late this decade. Doing a little original research, I have to agree. The Baby Boom generation is inching toward retirement, with the leading edge (and largest group) hitting retirment age in the next 6-8 years. After WWII the Boomers filled the cradles and spare bedrooms of America to the tune of about 50 million people. However, 32 million of those were born between 1946 and 1951. They are now ages 59 - 64 and have social security retirement ages of 65, as opposed to us later "echo" Boomers whose retirement ages range from 69 1/2 to 72.

So what happens in the next 6-8 years? Well, it's difficult to predict exactly. People are healthier and living longer, and may not want to retire. There is speculation that part-time work will become more common for seniors, as will incentive pay for companies to keep older workers on longer. Lost 401(k) and pension balances from this recession may force some people to work longer. On the other hand, the incessant implementation of new technologies may make more jobs unnecessary or obsolete, or move past what most older workers are willing or able to master.

Whichever of these factors influences the job picture more, one thing is for certain; the number of hours that people age 59 and over are contributing to this economy is about to drop off sharply. We've seen the impact of decreased hours in fields like medicine and pharmacy, where women's share of those jobs as risen sharply in the last three decades and where the aggregate weekly hours worked has plunged. Women in these high-paying professional positions can easily work fewer days and still make excellent livelihoods in order to attain work-life balance with child rearing. Great for them and their families, but the resulting shortage in doctors and pharmacists is well established.

So assume the 32 million leading-edge boomers have experienced some mortality, disability, and early retirement. Let's just say that we have only 25 million workers who retire or sharply cut back their hours? With low fertility in all subsequent generations, and with our obsessive and immoral purging of illegal aliens, there won't be enough people to fill jobs abandoned by Boomers. Look for a labor shortage, and a suburban housing glut starting about 2018 and moving on through about 2030.

Oh, and on the immigrant topic, here's a pinch of perspective. There are about 40 million first generation immigrants in this country right now. Of these, it's estimated that about 15 million are illegal. Wanna kick 'em out? Send 'em back where they came from courtesy of the Tea Party. Well, imagine the year 2020 and a roofing crew of old white guys. Good luck with that.

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