Returning from the annual Economic Policy Conference in Washington D.C., it takes a bit of work to try to bring focus to dozens of opinions, comments, charts and forecasts. Also, which of the most powerful and influential economic and business leaders in the world should I place stock in? Chairman of the Federal Reserve Ben Bernanke? Hmmm. Paul Krueger, Chief Economic Adviser to President Obama? Perhaps. How about Fred Smith, legendary founder and CEO of the global behemoth FedEx? Possibly. Throw in some Nobel Prize recipients, a Senator and a couple of Congressmen, regulators, lawyers, scholars and hundreds of others and it is kind of easy for a Fresno State communication major to feel a bit overwhelmed and simply sip my ice water and leave it to these clearly intelligent people.
From my vantage point, there was one unifying theme, an organizing framework that I saw emerging at this conference. The compelling question is if this vast economic reordering is cyclical or structural. If one believes it is the former, then sit back, keep your head down, and the economic reality most of us have known for our lives will, in time, return to normal. If your view is it is the latter, then waiting for the ‘good ole days’ to return will burden you with an economic yoke that can economically cripple you, and perhaps your children, for generations.
But the one issue for me that holds the greatest threat to our collective prosperity, even more so than overall debt (although clearly related), is that of long term unemployment. This is especially disconcerting, for unemployment has significant personal, health and familial concerns including depression and systemic earning power that, much like interest, compounds with time. Once laid off, an unemployed worker loses nearly 1% of their salary per month in the replacement job they may fine. Therefore, someone out of work for 12, 18, 24 months or even longer falls into an economic hole that they are unlikely to ever be able to dig themselves out of. Even for college graduates during times of recessions, it will likely take them 10 years or more to recover from the financial burden of bad timing.
But is it structural? Is education and job training aligned with the market? Has the U.S. fallen hopelessly behind the rising power of the emerging markets and new economies? Bernanke gave us somewhat mixed signals on this, as he seems to believe low demand for workers is a greater factor than misalignment of skills to the market.
Regardless, all of us, parents and children, professors and students, managers and workers, politicians and the people, must adapt to the rapidly changing economy. I have more to say on this topic. But for now, leave it at this: I like Greece, but I sure don’t want to live there.