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Hostess Cupcakes, Mitt Romney and the Sports Illustrated Swimsuit Issue: 2012 Economic Indicators?

2.27.2012

It’s an election year and one of the major focal points for presidential candidates is the high unemployment rate.  In past blogs, we’ve given our perspective on what to expect for job prospecting in 2012, but let’s take a look at the facts.  While the media and pundits go back and forth over the Obama administration’s effect on the unemployment rate and which economists believe that full recovery will take place now or years from now, we know that some factors are clearly better indicators than others.  From a finance major who graduated from college into one of the bleakest hiring outlooks for new grads in decades, here are four things you need to know about the health of the job market in 2012:


• Participation rate within the unemployment rate:  The unemployment rate today is at its lowest rate since 2008 due to increased job creation. However, it is skewed by the fact that an alarming number of people have dropped out of the work force.  Further, part-time workers that are still searching for full-time positions are also not accounted for. Because of this, the unemployment rate is not always an accurate or complete indicator of the health of the job market or the true nature of the workforce.

• Presidential candidates are highlighting unemployment:  The presidential candidates have mainly focused on the issues of illegal immigration and decreasing the power of unions, and thus are more concerned with lower skilled labor.   Barack Obama plans to focus on strengthening the industrial jobs within the United States and to help with the progress of small businesses. This leaves the problem of unemployment in higher level management and knowledge positions to the businesses themselves.   For example, Mitt Romney’s campaign site explains his plan to give greater freedoms to businesses with the hopes that it will strengthen the economy and the problem will sort itself out. In some ways, we already believe this is happening, and have seen an uptick in hiring at the executive level which we expect will continue for the foreseeable future. Business started to pick up in 2012, and organizations that have gone without filling specific management and high level functions are now more likely able to fill those needs. In the downturn, many businesses also reorganized and have identified new functional areas they perhaps weren’t aware of pre-2008.   

• Failing companies:  The failure and downsizing of large companies have resulted in an increase in the total amount of unemployed and have applied more pressure to the already small job pool.  Companies such as Kodak, Sbarros and American Airlines have filed for bankruptcy or Chapter 11 reorganization, and are expected to make labor changes—if they have not already done so—as they restructure and downsize.    Because several high profile companies, such as Friendly’s and Hostess Brands, have had very public issues in the downturn, it’s easy to hear numbers like the addition of 243,000 jobs in January and still question whether job growth will match new job seekers created by companies going bankrupt in 2012.

• Unconventional measures of economic health: Yes, the media and economists tell us that unemployment is a leading indicator (but more precisely, it is a leading indicator during contraction and a trailing indicator during recovery). Do you know what else is? Women’s hemlines. Bike Fatalities. The Sports Illustrated Swimsuit Cover. High Heels. Lots of “systems” supposedly measure the health of our economy, but the generalization across the board may not be true of all companies, industries, or geographical regions.  For example, Houston and other Texas cities have seen an abundance of jobs created within the past year and are forecasted to continue the trend.

Yes, we should probably expect that unemployment will more or less hold steady with the amount of jobs created matching the mix of people entering and leaving the workforce for mitigating reasons.   And yes, politicians can only promise so much and their influence only reaches so far. However, we have seen from our clients and the general marketplace that people and organizations are much more optimistic about the future than they have been in a long time, and I believe that the economy is on a (albeit slow) course to recovery.  As John Maynard Keynes once stated, “The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelope our future.”

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2 Comments

January 22, 2013 AT 3:39 PM CST

Randie Lin wrote:

My opinion is that the much of the unemployment is largely due to large companies downsizing during critical times. This attitude of "everyone for themselves" is not new. Unemployment happens at the convenience of economic meltdowns. Until someone comes up with a bright idea to prevent it, companies can help by having a contingent plan or two to prevent having to let people go during these hard times. We have to all work together to be able to pull out of them. The attitude should be "everyone for everyone".




January 22, 2013 AT 3:39 PM CST

Randie Lin wrote:

It is easy for the employed and the rich, like Romney, to say that things will work itself out in due time without intervention. He should visit the people who live paycheck to paycheck, highly skilled but laid off over and over, can't get hired because the jobs for their specific skill is always in a hiring freeze, etc.

A teacher spoke on television about her dilemma. She and her husband both hold multiple degrees yet somehow they lived paycheck to paycheck. She and her husband had taken turns being laid off from jobs. Yet they continue trying not to be discouraged. Meanwhile they have children to raise, mortgage to pay, etc. Eventually, she was able to get a teaching job but her husband still went without. She was extremely effective in her speech showing her high level of education.

Imagine her situation times thousands more. That's the reality of American employment.




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