One of the most important issues affecting the future of our country is the employment situation and our ability to create enough meaningful jobs to reduce the unemployment rate from its stubbornly high level.  There have been so many interesting stories of late related to the labor markets that I am struggling to decide which to highlight in this edition of Willingdon Views.  With that disclosure, here are a few notable ones…

The Economist –Decline of the working man – April 28, 2011…
According to this article, America has the lowest percentage of “prime age” males in the work force of all the world’s major economies.  The statistics are much worse for the less educated, with unemployment approaching 20% for those without a college degree and a whopping 35% for high school drop outs.  The social cost to structural employment at these levels is staggering, to say the least.  Not surprisingly, there is a long list of reasons for this disturbing situation.  The first culprit is the Great Recession.  No argument there, but after that the causes become more complex and politically sensitive, making solutions harder to agree upon.  Do government assistance programs help or do they make the problem worse by providing a disincentive to finding a job?  What would it take to motivate the private sector to invest some of its record level of cash into job creating initiatives?    And what can we do as individuals and families to help this growing segment of men finish their education, making them more likely to remain off the unemployment rolls?  None of these questions are easy to answer.

On the brighter side, hiring has started to pick up, especially at small businesses.  Based on an April 28th Wall Street Journal article – Hiring Starts to Pick Up Pace, small companies have added close to 190,000 jobs each month in 2011, a pace that is double the monthly job creation rate in the previous year.

Meanwhile, soaring wage rates in China, higher shipping costs, and tax incentives are all narrowing the gap between production costs in the U.S. and emerging economies around the world.  These trends are positive for our manufacturing sector and domestic employment.  In fact, the manufacturing sector is far from dead in this country, and actually grew 9.1% in the first quarter, far above the growth rate for the overall economy which was slightly below 2%.  Manufacturing employment has actually grown this year in Michigan, Ohio, Wisconsin, Indiana, and Pennsylvania.  I’m guessing most people don’t think of these states as the centerpiece of resurgence in manufacturing.

Within our labor markets, there is a current battle between union advocates and those that support right-to-work policies.  This political brouhaha is highlighted by the National Labor Relations Board’s complaint against Boeing, following the company’s announced plans to open a manufacturing plant in South Carolina.   The debate centers around defining what role, if any, the government should play in determining the location where a public company builds manufacturing facilities.

For better or for worse, we live in an age where virtually nothing happens in our economy unaffected by some governmental policy or agency.  Moreover, the trend lately has been toward more government involvement, not less.  What will happen to our economy and country if this trend continues?

The famous (or infamous) owner of the Oakland Raiders, Al Davis, had a classic line summarizing his philosophy – Just Win, Baby.  Davis wanted players who would get the job done.  The how really didn’t matter to him.

I think we could use a dose of Al Davis pragmatism… As a country, in order to win the future, as President Obama has challenged us to do, we have to accomplish several goals.  One of the most important of these is to produce a well-educated, highly motivated work force.  Niall Ferguson, a noted economic historian believes the era of U.S. economic dominance is over.  One of the reasons he sites for this is the “superiority of Chinese students particularly in math, and the nation’s tireless work ethic.”

Game on… The key to proving Mr. Ferguson wrong depends upon our ability to out-work and out-innovate the rest of the world.  In the final analysis, it matters little how we do this, only that these goals are accomplished.  But in this context we have to have some level of accountability for our leaders in Washington, as well as the private sector.  At some point, if the job isn’t getting done we have to alter our course or change leadership, or perhaps both.

One of the remarkable things about our country is its resiliency.  We have a history of, well, figuring it out, of solving any problem no matter how challenging it may be.  As history has shown, our country has produced its best in the direst situations.  Unfortunately, we have developed a warped rendition of this American resiliency, in two disturbing forms.  The first is the philosophy that whatever problem we have, it is someone else’s fault and job to fix it.  The second is that if we postpone disaster to another day the problem will somehow fix itself.  The lack of effective leadership and accountability are embarrassing, aren’t they?  But so is the lack of courage to step up and do something to help.  But we can all do something, can’t we?  It is our responsibility.  Every last one of us can do something, especially if we want to preserve our record of proving our doubters wrong.  Just win, baby.

Michael Kayes, CFA