Monday, March 10, 2014
All the stories about the stock market hitting new highs grabbed my attention this week. All the graphs depicting the sharp V of the Dow Jones Industrial Average plunging sharply from its high in October 2007 to its low in March 2009, followed by a four-year climb back up to pass its previous peak last week, led me to contemplate some other metrics of the business cycle that haven't recovered so well.
Nationally, seasonally adjusted non-farm employment reached a peak of just over 138 million in January 2008. For the next 2½ years, employment dropped steadily, reaching a low of just under 130 million in September 2010. Since then, national employment has climbed steadily -- very slowly, but steadily -- to the point that by December 2012 it had reached just under 135 million. This left it at 98 percent of its January 2008 peak, not quite setting a new high like the Dow, but close.
In Maine, however, the picture is not the stark V of the stock market, nor even the gradual U of the national labor market. It is more like a troubling lazy L -- a nearly vertical drop followed by a squiggly line that moves slowly up and down but doesn't get anywhere.
For Maine, seasonally adjusted non-farm employment reached a peak of 621,000 in May-June of 2008. That number fell sharply for the next year and a half, reaching a low of 592,000 in November 2009.
Since then, employment in Maine has bounced around between 592,000 and 598,000, falling to cyclical lows of 591,000 in May 2011 and August 2012 and highs of 598,000 in February 2012 and 596,000 in September 2012. These blips are probably just noise -- flukes of sampling and seasonal adjustments. At the end of the graph in December 2012, Maine stood at 95 percent of its June 2008 peak, the very same level as November 2009.
Why this L curve in Maine instead of the V curve that has stock investors so excited? There are many reasons: an absence of recovery-leading sectors like communications technology, energy production and business services; an aging population characterized by retirees leaving the labor market and young graduates looking elsewhere for jobs; an absence of candidates with the skills potential employers are seeking; uncertainty about the future of taxes, health and energy costs and the duration of low interest rates; and tighter lending restrictions following the Dodd-Frank financial reforms. All these factors play a role.
But the important point to be made here is that this problem, this issue -- job creation -- is at the core of all others. We won't be able to pay hospitals or provide health care; we won't be able to pay for our schools, maintain our roads and ports or keep our communities safe if our employment level keeps bouncing around between 590,000 and 600,000.
If that squiggly employment line we've seen for the past four years is indeed our future, then we better start adjusting our expectations for public services downward. Hospitals and schools will close. Roads will remain potholed. Response times for police calls will rise. The number of vacant storefronts in small village centers and downtowns will grow.
We simply can't maintain current levels of public service with a stagnant employment base.
So what's the answer? What is the appropriate public policy response to stagnant employment?
For me, the answer is threefold.
First, wake up, acknowledge the centrality of this problem and focus our attention. We need a Pearl Harbor, a 9/11 moment. Employment growth is not just job one; it's job one, two and three. Second, think entrepreneurially and start everywhere; don't try to pick winners, encourage everyone to try something, cheer the winners as they emerge and encourage the unsuccessful to try again. Third, look globally; we can't create enough jobs taking in each other's laundry; we need to tell -- and show -- the world what a great place we are, and encourage entrepreneurs to come.
Maine's model should be the iPhone -- a transformative platform for developing ideas for things no one knew they needed, but can't get along without after they see the light.
Charles Lawton is chief economist for Planning Decisions Inc. He can be reached at: