For Some Jobs, this May be as Good as it Gets
Some pundits are already calling the the beginning of the end of the recession, including exhortations to aggressively buy into to the current (sort-of) rally in market. That may be good for investors willing to take on risk once again.
Wage Growth May Stagnate or Decline
According to analysis by the Economic Policy Institute, the jobs outlook has not improved. This has implications for an increase in the number of long-term unemployed (those out of work for more than 6 months.) At the end of April, 27% of those looking for work fell in that category.
But the bigger problem – even for those with jobs – is what has happened and will continue to happen with cost-cutting by employers. Just as consumers are learning to save more and spend less on non-essential goods and services, employers are finding ways to cut labor costs and make them permanent. It’s a new era of frugality all the way around. The EPI put it this way:
One more statistic that is often not addressed in jobs data reports, is wages. The real incomes of middle-class families have traditionally grown over the course of a business cycle but recent statistics show that many workers are challenged to increase their earning power even in the good times, when the economy is robust and they have jobs. At the end of the latest business cycle in 2007, for the first time since the Census Bureau began tracking this sort of data, the real incomes of middle-class families were lower than when the business cycle started out six years earlier.
In a nutshell, this tells us that even before our current economic disaster, real incomes for middle-class Americans had not only stagnated, they had declined during the last business cycle. That’s not a good stage-setter for what is to come during the next business cycle. Employers are unlikely to repeat the “growth for growth’s sake” mistakes of the bubble years.
The outlook is even worse for older career-changers, who may be looking for a financial boost from a new job in a new field. A study by the AARP and Urban Institute showed a significant wage drop for those folks, with some trading income for flexibility or enjoyment. That’s not a bad trade-off if you are prepared for it. Re-careering takes on a whole new meaning when it means lower income.
Is Relocation the Answer?
So what does someone do to avoid being caught in a falling wage tide? First – and this may be easier said than done – get out of those areas of the country that are least likely to experience a significant jobs recovery. It only makes sense that fewer jobs for the same amount of job-seekers depresses wages for everyone.
The experts are willing and able to tell us where that is likely to happen, i.e., the best and worst cities for job growth. Forbes has analyzed that data and concludes that if you live in Ohio or Michigan, your employment future is grim. We probably could have guessed that but the numbers are compelling. On the other hand – and again according to Forbes – the best cities for job growth are in Texas or college towns.
Frankly, if I were young and relatively unattached to my current geography, I would be taking a long and hard look at all of this data and planning my future accordingly. It would be hard to accept at the beginning – or even in the middle – of your working life that this is as good as it gets. But if you are in the wrong place at the wrong time (such as now), that could be you.
Photo credit: Mattias H.