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.

10 signals and trends

Gleaned from recent press reports and other sources:

These are boom times for U.S. makers of unmanned military aircraft (drones).

Sample Lab Ltd. opened a  “marketing cafe” in Tokyo that lets trend-setting women see and test new products.

With the recession crimping legal budgets, some big companies are insisting on flat-fee payments instead of law firms’ long-standing practice of the “billable hour.”

City “water cops” are handing out citations to people caught wasting water resources in drought-stricken areas.

Lumber mills that produce woods for hardwood floors and maple cabinets have been devastated by the U.S. recession’s double whammy: the housing bust and unavailable credit.

Some hospitals find that owning up to medical errors reduces litigation and helps them learn from their mistakes.

Despite a 25-year effort to improve U.S. education, the latest high-school SAT exam scores are disappointing. Asian-American students are thriving but the SAT gap for blacks and Hispanics widens.

More than half of Somalia’s population needs humanitarian aid, the U.N. says.

Software makers are scrambling to develop cell phone safety applications that prevent texting while driving.

Inexpensive mini-reactors may be an alternative to building giant nuclear powerplants, though there are technical, financial and regulatory hurdles.

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

Very early signs of ecomigration

A rising tide may lift the boats but it may also cause people to relocate. Rising sea levels and storms brought on by global warming may lead people to move to higher ground, greener pastures or interior regions. The Washington Post (23 February 2009) calls them ecomigrants. The article cites two examples:

• Adam Fier, of Montgomery County, Md., has moved his family to New Zealand, where he likes the green policies and feels safe from conflict.
• The president of Kiribati, a Pacific nation of low-lying islands, is exploring ways to move all 100,000
  

  Channel between two Kiribati islands

  citizens to a new homeland because of fears that a steadily rising ocean will make the islands uninhabitable. He called for an international fund to buy land for such mass migrations.

The article also hints that people in hurricane-prone areas (such as Louisiana and Florida) are thinking of moving elsewhere.

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Related: 2080: Global warming leads to floods, droughts, agricultural disasters, hunger

Twitter: RT @mitchbetts Ecomigration: People worried about global warming (rising seas) are moving to higher ground. http://bit.ly/12HwSV

The next 100 years in geopolitical affairs

George Friedman — founder & CEO of the geopolitical intelligence firm Stratfor — has a new book coming out Jan. 27: “The Next 100 Years: A Forecast for the 21st Century.” Now Friedman acknowledges that forecasting 100 years into the future may seem audacious, “but, as I hope you will see, it is a rational, feasible process, and it is hardly frivolous.”

“In this book, I am trying to transmit a sense of the future. I will, of course, get many details wrong. But the goal is to identify the major tendencies — geopolitical, technological, demographic, cultural, military — in their broadest sense, and to define the major events that might take place.”

I stumbled across this news at “John Mauldin’s Outside the Box” blog. Maudlin hints that the book can be hard to believe in places, but ultimately he calls it fascinating and thought-provoking.  “George’s strength is his ability to take geopolitical patterns and use them to forecast future events, sometimes with startling and counter-intuitive results,” Maudlin says.

For example, Maudlin notes that Friedman’s book forecasts the following:

• By the middle of this century, Poland and Turkey will be major international players
• Russia will be a regional power — after emerging from a second cold war
• Space-based solar power will completely change the global energy dynamic
• The border areas between the U.S. and Mexico are going to be in play again
• Shrinking labor pools will cause countries to compete for immigrants rather than fighting to keep them out

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Related:
Anticipating wild cards in world affairs

Twitter: RT @mitchbetts Preview of George Friedman’s new book “The Next 100 Years: A Forecast for the 21st Century.” http://bit.ly/c8QX

OK, the 401(k) retirement system didn’t work. What’s next?

For years the conventional wisdom has been to plow money into 401(k) plans for retirement. Anyone who didn’t was considered a financial dunce. Well, so much for conventional wisdom. The 401(k) system has “serious shortcomings,” says The Wall Street Journal (“Big slide in 401(k)s spurs calls for change,” 8 January 2009). Employees have seen their retirement accounts drop, 20%, 30%, 44% in the economic downturn.

“This is the biggest test that the 401(k) plan has seen to date, and it has failed,” says Robyn Credico, head of defined-contribution consulting at Watson Wyatt Worldwide, noting that many baby boomers are ready to retire. “We’ve put people close to retirement in a very challenging position.”

The timing couldn’t have been worse.

[E]ven when workers make good choices, a market meltdown near the end of their working careers can still blow their savings to smithereens.

“That seems like such a fundamental flaw,” says Alicia Munnell, director of Boston College’s Center for Retirement Research. “It’s so crazy to have a system where people can lose half their assets right before they retire.”

The U.S. Congress is beginning to take a look at retirement and 401(k) policy, starting with an October 2008 committee hearing with a variety of witnesses.

Some proposed setting up “universal” retirement accounts, which would cover all workers. One such plan called for establishing accounts that would receive annual contributions from the federal government, and would offer a guaranteed, but relatively low, rate of return. Another proposed automatically investing contributions in an index fund that holds stocks and bonds, with the mix getting more conservative as workers approach retirement.

U.S. Rep. George Miller (D-Calif.), the chairman of the House Education and Labor Committee, recently issued the following principles for future 401(k) reform:

• Expose excess fees that Wall Street middlemen take from workers accounts.
• Bring young and low-wage workers into the system at a higher rate through automatic enrollment for employers already offering 401(k)s.
• Ensure that retirement accounts have diversified investment options with low fees, including low-cost index funds.
• Ensure workers have access to reliable independent investment advice.
• Reduce vesting periods and improve portability of 401(k) accounts.

But is this just minor tinkering with a system still dependent upon the wildly fluctuating stock market (not much different from gambling)? Do we need more radical reform that provides a solid financial foundation for retirement?

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Related:

• Are Retirement Savings Too Exposed to Market Risk?
• The failure of our 401(k)s
• Deloitte white paper, 2007: Future of 401(k)s (.pdf)

For Twitter: RT @mitchbetts “OK, the 401(k) retirement system didn’t work. What’s next?” http://tinyurl.com/7mp2j5

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
  

The president-elect will face big problems, threats

It’ll be a short honeymoon. The next U.S. president will face high expectations (which may be impossible to fulfill), a recessionary economy and huge budget deficits. And that’s just domestically. Mike McConnell, the director of national intelligence, gave a speech this week that lays out the broader threats. As The Washington Post reported:

The next U.S. president will govern in an era of increasing international instability, including a heightened risk of terrorist attacks in the near future, long-term prospects of regional conflicts and diminished U.S. dominance across the globe, the nation’s top intelligence officer said Thursday.

Competition for energy, water and food will drive conflicts between nations to a degree not seen in decades, and climate change and global economic upheaval will amplify the effects, [McConnell said].

“After the new president-elect’s excitement subsides after winning the election, it is going to be dampened somewhat when he begins to focus on the realities of the myriad of changes and challenges,” he said.

Of course, besides the predictable conflicts and threats, “there is always surprise,” McConnell said. (Futurists call ‘em wild cards.)

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

‘The Era of Angry Populism has only just begun’

Robert Reich — author, professor and former U.S. secretary of labor — describes the mood of the American populace tonight, shortly before the U.S. Senate vote on the so-called financial bailout bill. His conclusion: “angry populism is about to explode.”

This mood will last longer than one night or one week; it will carry over into the November elections and well into the first year of the next White House administration.

Excerpts from Reich’s blog post:

While more Americans are coming around to “supporting” the bailout bill, the vast majority still hate the idea of bailing out Wall Street. They’re for the bailout bill now only because they fear that a failure to pass it will have worse consequences — drying up credit at a time when Main Street is struggling. But make no mistake: America is mad as hell. They resent what they perceive as extortion by the Masters of the Universe.

Angry populism has always been a potent force in American politics. And now, with wages dropping, jobs insecure, fuel and food and health-insurance costs soaring, and millions of homes in jeopardy — and what’s perceived to be a massive taxpayer bailout of some of the richest people in the land — angry populism is about to explode.

The larger economic outlook is not encouraging. All signs point to the economy worsening, bailout or no bailout. Unemployment will continue to rise. Median earnings will continue to drop, adjusted for inflation. More Americans will lose their health insurance.

The Era of Angry Populism has only just begun.

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Related:
The resurgence of anti-business populism; more regulation ahead