(November 18, 2003) - Is it or isn't it a "jobless recovery"? Should we blame India? Bush? Silicon Valley? Iraq? Politics as Usual? Structural Change? Other Causes? One thing is certain, job growth is a "lagging indicator".

from the Conference Board

Consumer sentiment, glum for years now, is beginning to edge up slightly from deep troughs.

Consumers' appraisal of present-day conditions ended a five-month slide in October. Those reporting jobs are "hard to get" eased to 33.8 percent from 35.1 percent. Those claiming jobs are "plentiful" rose to 11.8 percent from 9.9 percent. Consumers' assessment of current business conditions also improved, with families rating conditions as "good" increasing to 17.2 percent, up from 16.2 percent. Those claiming conditions were "bad" fell to 28.4 percent from 29.5 percent.

Consumers' short-term outlook also picked up in October. Those expecting business conditions to improve over the next six months rose to 23.2 percent from 21.3 percent. Consumers expecting business conditions to become worse edged down to 11.3 percent from 11.9 percent.
from the Conference Board

From here, it looks like a great deal of the uncertainty in both the economy and consumer confidence is a function of just how good it really was in the late 90s. The old adage goes something like "The higher you rise, the harder you fall." Economic stability and the enthusiasm that could follow it probably won't emerge until we stop comparing our current situation against the way it used to be.

The current moment is rich in opportunity. Dismal views of the job market make switching easier for those with the courage to believe that the macro view does not apply to them. It's a powerful time to start businesses, win new accounts and launch new ideas. This is a moment in which the people with "the juice" are making their moves.

Some of the moaning about economics is misplaced. The early effects of the labor shortage are keeping unemployment numbers significantly low. In the lifetime of most of our readers, 6% unemployment has been viewed as the last stop on the way to full employment. Only the comparison to a stunning 3.8% rate in the Clinton years makes today seem anything less than wonderful. A small sustained uptick will drive the number back under 5%.

There are a number of things for which to be grateful. A rapid change to 5% unemployment would certainly start an inflationary pressure cooker. The labor shortage will drive inflation in the late part of this decade. The longer we put it off, the better off we'll be. When jobs become "easy" to get, retirement rates will soar from 2%/year (today) to 4% or 5% making replacement and knowledge management central concerns. Sustained low unemployment rates will drive consumer confidence to the point that retirees are "certain" that they can find supplemental income.

In other words, there are a lot of good reasons to hope that the economy stays in its current unsettled and conservative state. As we get used to this new operating environment, we are laying the groundwork for a powerful and different kind of economic expansion. This time period is all about foundation building and the longer that we spend building the foundation, the sturdier the next phase will be.

John Sumser

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