By now you’ve probably heard the news that the Great Recession officially ended in June 2009. That’s the verdict of the economists on the Business Cycle Dating Committee of the National Bureau of Economic Research. This means we have already been in a recovery for 15 months. Why doesn’t it feel like that? And what does this mean for your job prospects?
Many of the indicators of recovery that the economists examined show that this recovery is weak. For example, the gross domestic product in the second quarter of this year advanced only 1.6 percent, a slowdown from the 3.7 percent of the first quarter. In July, existing home sales were at their lowest level in a decade.
But not all indicators show weaknesses. To me, the most startling figure is that corporate profits last quarter ($1639.3 billion) were only 1 percent lower than they were at their pre-recession peak ($1655.1 billion). They have risen steadily for the past six quarters. In other words, companies are sitting on a mountain of cash.
That’s why it’s all the more startling that job creation has been so dismal. In fact, we have actually lost more jobs than we have gained since the recovery began.
You may be wondering how corporations can be making such big profits while economic growth is tepid and so many people aren’t working. The reason is productivity gains. American workers who are still employed keep on producing more output relative to what they’re paid. It’s important to understand why this is happening. Some of it is because the workers are putting in longer hours. Some of it is because businesses have invested in machinery and computers that increase workers’ output. And much of it is because we have a leaner, meaner workforce. So many low-skill workers have been laid off. The work that they used to do has either been shipped overseas or is being done by machinery and computers operated by high-skill workers.
Here’s an indication of how lean and mean our workforce has become: Workers over 25 who have a bachelor’s degree or higher had an unemployment rate of 4.6 percent in August, while those with only a high school diploma had a rate of 10.3 percent. Compare that gap of 5.7 percent to the gap of only 2.6 percent when the recession began. Figures for the duration of unemployment tell a similar story. In August, the median duration of unemployment for the college grads was 18.4 weeks, compared to 27.5 weeks for the high school grads. Three years ago, there was only about one unemployed day of difference between the two groups.
There’s little reason to think that this lean, mean workforce will be able to get fat and lazy anytime soon. A report this week from the Federal Reserve Bank of San Francisco says that "capital utilization" (i.e., investment in machinery and computers) has been one of the main drivers of recent productivity growth but notes that the level of investment has been below historical averages. The report concludes that businesses will be able to squeeze still more productivity out of the employed workforce through increased capital utilization rather than through increased hiring.
What is the implication for your job prospects? To be part of the leaner workforce, you need to be meaner. By “meaner,” I don’t mean more ruthless (although you do need to be aggressive in your job-hunting), but rather that you need to be one of the high-skill workers. You need to aim for the highest-skill work that you’re capable of and--better yet--you should plan to upgrade your skills. If you’re still in school, plan to get a higher-level degree than you might have had in mind originally. If you’re out of school, think about formal or informal training to upgrade your skills. And be sure to do more than thinking and planning. Commit to some specific action.
This is the central theme of my latest book, 2011 Career Plan: The Best Moves Now for a Solid Future, and it’s why I take a rather pushy tone in that book. It’s also why so many of my recent blogs have been about the theme of improving your skills. Your job survival in this economy depends on taking action to be one of the highly skilled workers.