The future of unemployment

It’s not looking good, especially for the next few years. A recent poll of economists found that, on average, they don’t expect the U.S. unemployment rate to fall below 6% until 2013. (The unemployment rate at this writing is 9.8%.)

“Never before has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance,” said Allen Sinai at Decision Economics.

On average the economists … expect the unemployment rate to peak at 10.2% in February. But even once the employment situation stops getting worse, economists expect recovery to come slowly. “It could take until 2014-15 before we see a 5% handle on unemployment again,” said Diane Swonk at Mesirow Financial. Persistently high unemployment could prove a political hot potato not only for the 2010 midterm elections for Congress but also for the 2012 presidential election.

Rutgers economists say the U.S. job market recovery may take seven years — to late 2017. Others say it may take more than a decade to reach the 5% unemployment rate that prevailed until the economic downturn.

The headline of a recent Wall Street Journal article says it all: “It Will Be Years Before Lost Jobs Return — and Many Never Will.”

In addition to replacing 7.2 million lost jobs [from the recession], the economy needs an additional 100,000 a month to keep up with population growth. If the job market returns to the rapid pace of the 1990s — adding 2.15 million private-sector jobs a year, double the 2001-2007 pace — the U.S. wouldn’t get back to a 5% unemployment rate until late 2017, Rutgers University economist Joseph Seneca estimated. And that assumes no recession between now and then. “Even with some very optimistic assumptions, it’s a long road back,” Mr. Seneca said.

Where will the jobs come from? As the economy grows, some companies may hire back laid-off workers. But some jobs in real estate, finance, construction and leisure industries may be gone forever.

The government and progressives are counting on “green jobs” to fill the gap, but those jobs will take several years to materialize and depend on technology advancements.

Water issues give solar, wind power another advantage over traditional power plants

“Advocates for alternative energy are discovering that water issues may prove to be as important a selling point for the industry as reducing carbon-dioxide emissions,” according to an article headlined “Water Worries Shape Local Energy Decisions,” in The Wall Street Journal (26 March 2009).

Especially in the western U.S., where water can be scarce, communities are turning to wind farms or solar arrays — which have minimal water needs — instead of building traditional power plants that consume more water.

The electric-power industry accounts for nearly half of all water withdrawals in the U.S., with agricultural irrigation coming in a distant second at about 35%. Even though most of the water used by the power sector eventually is returned to waterways or the ground, 2% to 3% is lost through evaporation, amounting to 1.6 trillion to 1.7 trillion gallons a year that might otherwise enhance fisheries or recharge aquifers, according to a Department of Energy study.

The study concluded that a megawatt hour of electricity produced by a wind turbine can save 200 to 600 gallons of water compared with the amount required by a modern gas-fired power plant to make that same amount.

Twitter: RT @mitchbetts Solar & wind farms have another advantage over traditional power plants: They use a lot less water. http://bit.ly/1a4GCx

Future shocks: Killer robots, hyperaging, space tourism, intelligent cars, resource wars

The Washington Post Outlook section (4 January 2009) is full of articles under the label “future shocks.” A sampling:

The world won’t be aging gracefully. “For the world’s wealthy nations, the 2020s are set to be a decade of hyperaging and population decline. Many countries will experience fiscal crisis, economic stagnation and ugly political battles over entitlements and immigration. Meanwhile, poor countries will be buffeted by their own demographic storms. Some will be overwhelmed by massive age waves that they can’t afford, while others will be whipsawed by new explosions of youth whose aspirations they cannot satisfy. The risk of social and political upheaval and military aggression will grow throughout the developing world — even as the developed world’s capacity to deal with these threats weakens. The rich countries have been aging for decades, due to falling birthrates and rising life spans. But in the 2020s, this aging will get an extra kick as large postwar baby boom generations move into retirement.” — Neil Howe and Richard Jackson are researchers at the Center for Strategic and International Studies and co-authors of “The Graying of the Great Powers: Demography and Geopolitics in the 21st Century.”

Coming to the battlefield: Stone-cold robot killers. “Armed robots will all be snipers. Stone-cold killers, every one of them. They will aim with inhuman precision and fire without human hesitation. They will not need bonuses to enlist or housing for their families or expensive training ranges or retirement payments.” — John Pike is the director of the military information Web site GlobalSecurity.org.

The next big things:

• Space tourism in 2012 (+/- 2 years) >>>>
  

  Spaceship for space tourism

• Intelligent cars in 2014 (+/- 4 years)
• Telemedicine in 2015 (+/- 4 years)
• Thought power (brain signals controlling systems) in 2020 (+/- 9 years)
• Artificial intelligence in 2021 (+/- 7 years)
• Smart robots in 2022 (+/- 7 years)
• Alternative energy in 2022 (+/- 9 years)
• Cancer cure in 2024 (+/- 8 years)

— William E. Halal, president of TechCast LLC

Global warming could lead to warfare over scarce resources (e.g., arable land and fresh water); mass migrations; and territorial disputes over newly available energy resources (e.g. Arctic oil). — James R. Lee runs American University’s Inventory of Conflict and Environment project. He’s at work on a book on climate change and conflict.

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Related:

• Stanford researchers trying to develop robot like the Jetson’s Rosie
• 2080: Global warming leads to floods, droughts, agricultural disasters, hunger
  

Measuring innovation: The top five R&D metrics

The following are the top five R&D metrics used by industry (2008):

1. R&D spending as a percentage of sales (77%)
2. Total patents filed/pending/awarded/rejected (61%)
3. Total R&D headcount (59%)
4. Current-year percentage sales due to new products released in the past six years (56%)
5. Number of new products released (53%)

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Source: Goldense Group Inc.’s 2008 Product Development Metrics Survey
Base: 200 companies that design and develop new products
Discovered via ThomasNet’s Industrial Market Trends

Peripheral vision

Five developments that caught my eye:

• For the first time in America’s recent history, future generations may be worse off economically than their parents, warns economist Ross Gittell at the University of New Hampshire.
• China influences global public opinion by paying 300,000 people to post comments in online message boards.
• State laws requiring smoke-free casinos are hurting casino revenues. “Even relatively quick smoke breaks interrupt the in-the-zone mentality critical to keeping gamblers in play.”
• Spain is paying jobless immigrants to go home, in an attempt to cut social services spending.
• Gasoline demand in the U.S. may have reached its peak in 2007, because Americans are driving less and demanding greater fuel efficiency as a result of sustained high prices, according to Cambridge Energy Research Associates.

Top five political issues in the U.S., 2008

Top five political issues in the U.S. ( May 2008 )

Issues cited as “very important”

• Economy (88%)
• Education (78%)
• Health care (78%)
• Jobs (78%)
• Energy (77%)

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Source: Pew Research Center telephone poll of 1,505 adults, conducted May 21-25; multiple responses allowed. The margin of error is +/- 3 percentage points. Reported in The Wall Street Journal 9 June 2008.

Note: A similar poll last year had Iraq as the top issue.

A devastating year for U.S. financial services

Year-to-date share performance:

• Merrill Lynch: -27%
• Citigroup: -32%
• Washington Mutual: -45%
• Lehman Brothers: -51%
• National City Corp.: -70%
• MBIA: -71%

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Source: WSJ Market Data Group, The Wall Street Journal 9 June 2008

Top concerns of CFOs, 2008

The top external concerns of U.S. CFOs:

1. Consumer demand
2. Credit markets & interest rates
3. Housing-market fallout
4. Cost of fuel
5. Cost of nonfuel commodities

Top internal, company-specific concerns:

1. Cost & availability of labor [nonfinance]
2. Ability to forecast results
3. Cost of health care
4. Supply-chain risk
5. Data security

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Source: Duke University/CFO magazine survey of 475 U.S. CFOs, May 2008

Related:
June 2007 (previous post) What CFOs worry about
Most companies fail at forecasting earnings
CFOs predict: The top business risks through 2009

Wall Street analysts still hyping their stock picks

Wall Street analysts are painting an awfully rosy picture of earnings growth, according to a study done by Penn State researchers. “[T]heir long-term earnings-per-share growth-rate forecasts are excessive and upwardly biased,” says J. Randall Woolridge, a professor of finance at the Smeal College of Business.

Over the period 1984 to 2006, analysts’ predicted EPS growth at an average of 14.7% for the long term (three to five years). Actual EPS growth: 9.1%.

On one-year forecasts, analyst projections fared a little better, but they were still overly optimistic: 13.8% instead of the actual rate of 9.8%.

So why is this happening?

• Analysts’ employers want them to hype stocks so the brokerage can win commissions and underwriting deals. “This conflict of interest should have been squelched by former New York Attorney General Elliot Spitzer’s investigation and the $1.5 billion payment made by U.S. investment firms in the 2003 Global Analysts Research Settlements (GARS).” But the study found that GARS had no effect; analyst forecasts remained at their historic levels of about 15%.
• Analysts don’t issue forecasts on stocks they don’t like.
• Analysts becoming attached to the companies that they follow and, as a result, lose objectivity.

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Related:
Most companies fail at forecasting earnings
The fallacy — and cost — of giving quarterly earnings guidance

A sudden downturn in consumer gadget mania

The latest consumer spending survey from ChangeWave Research shows “a sudden, huge pullback in U.S. consumer retail spending on electronics — the largest decline since 2002.” The survey of 4,427 consumers, conducted February 18-25, looked at discretionary spending on a range of popular electronic devices, including video game consoles, digital cameras and iPods.

In an unprecedented sign of weakness, only 19% of survey respondents say they’ll spend more on electronics over the next 90 days, compared to 33% who will spend less.

“These results clearly show that the consumer electronics sector is getting whacked,” said Tobin Smith, founder of ChangeWave Research and editor of ChangeWave Investing.

Hardest-hit stores: Best Buy and Circuit City. (But Costco and Wal-Mart will be OK.)

Hardest-hit products: LCD TVs, digital cameras, cell phones and iPods.

Bright spots: The Nintendo Wii, Blu-ray HD DVD players and GPS devices.

And there was little evidence that consumers will be spending their “economic stimulus” tax rebate checks on consumer electronics.

“Rather, our findings point to an increasingly preoccupied American consumer who has fallen out of love with gadgets — at least temporarily,” Smith said.