(March 15, 2004) - We're a bit hooked on the idea in the Rand Study footnotes....that the economy will struggle to fill its jobs during economic good times. With workforce growth constrained to whatever immigration can be managed to produce (is anyone managing it?), the risks associated with growth are multiplying.

• The annual growth rate of the nation's workforce is expected to slow to a nearly static 0.4 percent by 2010. That's a sharp decline from the 1.1 percent annual increases seen in the 1990s and the 2.6 percent annual increases experienced during the 1970s. The slowing workforce growth rate is caused primarily by a 25 percent decline in the birthrate that followed the end of the baby boom in the mid 1960s, coupled with a trend toward earlier retirement by men. The influx of immigrant workers and women into the workforce has counteracted these forces so that the workforce has continued to expand, albeit at a slower rate.
   
• Technology will continue to shape the economy in greater ways, while the pace of those impacts will accelerate. With advances in technology and an increasingly global economy, employees will be more mobile and work in more decentralized, specialized firms with less formal and more individualized employer-employee relationships. While technology has many benefits for the workforce, such as increased productivity, it also forces workers to maintain their skills through lifelong learning. Workers with fewer skills will command much lower salaries and risk job loss to their better-trained counterparts — domestically and globally. At the same time, technology-mediated learning offers promise for worker training and retraining.
   
• Economic globalization will affect industries and segments of the workforce that in the past were relatively isolated from outside competition, boosting trade, affecting capital flows, encouraging mobile populations, and causing rapid transfer of knowledge and technologies. While some sectors might experience a net loss in jobs and market share, those consequences should be counterbalanced by gains in other sectors.
  
  - From the Rand Study

After considering the range of possible uptick scenarios and the role of investment in job creation, we're starting to see a looming issue in the 2007 - 2008 time frame. That's fairly near term. The scene looks something like this:

Following six years of pent up demand, retirement generated investment begins to flow into the market, creating jobs fairly quickly. Once the unemployment rate falls squarely below 5%, the skills and labor shortages start to make their mark.

We'd encourage our readers to consider this particular scenario carefully. If labor market pressure has either inflationary consequences (somewhat likely) or production schedule consequences (very likely), planning for the 2007 hiring environment should begin in earnest.