Where Will the Jobs Come From?
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By John Mauldin

Nov 19, 2012





For the last year, as I travel around, it seems a main topic of conversation is “Where will my kids find jobs?” It is a topic I am all too familiar with. Where indeed? Youth unemployment in the US is 17.1%. If you are in Europe the problem is even more pronounced. The basket case that is Greece has youth unemployment of 58%, and Spain is close at 55%.




Portugal is at 36% and in Italy it’s 35%. France is over 25%. Is this just a cyclical symptom of the credit crisis? Much of it clearly is, but I think there is something deeper at work here, an underlying tectonic shift in the foundation of employment. And that means that before we see a true recovery in the unemployment rate, there must be a shift in how we think about work and training for the future of employment. This week is the first of what will be occasional letters over the coming months with an emphasis on employment. (This letter will print a little longer, as there are a lot of charts.)


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Now, let’s think about employment.





The Next Bubble





Let’s look at a few facts put forth by the Young Entrepreneur Council from their list of 43 (available here):


1 out of 2 college grads – about 1.5 million, or about 53.6 percent, of bachelor’s degree holders age 25 or younger – were unemployed or underemployed in 2011.


For high school grads (age 17-20), the unemployment rate was 31.1 percent from April 2011-March 2012; underemployment was 54 percent.


For young college grads (age 21-24), unemployment was 9.4 percent last year, while underemployment was 19.1 percent.


According to some researchers, up to 95 percent of job positions lost occurred in low-tech, middle-income jobs like bank tellers. Gains in jobs are going to workers at the top or the bottom, not in the middle.


More college graduates are getting low-level jobs, period. U.S. bachelor’s degree holders are more likely to wait tables, tend bar or become food-service helpers than to be employed as engineers, physicists, chemists or mathematicians combined100,000 versus 90,000.


According to new U.S. government projections, only three of the 30 occupations with the largest projected number of job openings in the next eight years will require a bachelor’s degree or higher. Most job openings by 2020 will be in low-wage professions like retail sales, fast food and truck driving.




While there may not be a bubble in education, there is definitely a growing debt bubble in student loans. More than 1/3 of young Americans of college age went back to school because of the economy, and in doing so have contributed to the $1 trillion in student loans. People are clearly going back to school and taking out loans as a way to make ends meet.




The average college graduate has $25,000 in debt. Default rates are up 31% in the last two years. Student loans are relatively easy to get. They are like the old NINJA subprime mortgage loans available toward the end of the housing bubble: “No income, no job, no assets.” And they are just as likely to end up in default.




But Congress recently passed new bankruptcy laws, and unlike housing loans, student loans cannot be discharged in a bankruptcy. The law of compound interest means that borrowers, mostly young, will be paying back this debt for many, many years.



We have told our children that education is their ticket to a better life. And the data still shows that there is a clear advantage to having a college degree. But our recent experience suggests that not all college degrees are created equal.




Tom Friedman, writing in this weekend’s New York Times, highlights the problem of education and jobs. He quotes Traci Tapani, who with her sister runs a sheet metal company in Wyoming with 55 employees.




“About 2009,” she explained, “when the economy was collapsing and there was a lot of unemployment, we were working with a company that got a contract to armor Humvees,” so her 55-person company “had to hire a lot of people. I was in the market looking for 10 welders. I had lots and lots of applicants, but they did not have enough skill to meet the standard for armoring Humvees. Many years ago, people learned to weld in a high school shop class or in a family business or farm, and they came up through the ranks and capped out at a certain skill level. They did not know the science behind welding,” so could not meet the new standards of the U.S. military and aerospace industry.



“They could make beautiful welds,” she said, “but they did not understand metallurgy, modern cleaning and brushing techniques” and how different metals and gases, pressures and temperatures had to be combined. Moreover, in small manufacturing businesses like hers, explained Tapani, “unlike a Chinese firm that does high-volume, low-tech jobs, we do a lot of low-volume, high-tech jobs, and each one has its own design drawings. So a welder has to be able to read and understand five different design drawings in a single day.”



[She ended up training her new potential employees and eventually was able to train someone to train welders.] But even getting the right raw recruits is not easy. Welding “is a $20-an-hour job with health care, paid vacations and full benefits,” said Tapani, “but you have to have science and math. I can’t think of any job in my sheet metal fabrication company where math is not important. If you work in a manufacturing facility, you use math every day; you need to compute angles and understand what happens to a piece of metal when it’s bent to a certain angle.”





Who knew? Welding is now a STEM job – that is, a job that requires knowledge of science, technology, engineering and math.




Employers across America will tell you similar stories. It’s one reason we have three million open jobs around the country but 8 percent unemployment. We’re in the midst of a perfect storm: a Great Recession that has caused a sharp increase in unemployment and a Great Inflection – a merger of the information technology revolution and globalization that is simultaneously wiping out many decent-wage, middle-skilled jobs, which were the foundation of our middle class, and replacing them with decent-wage, high-skilled jobs. Every decent-paying job today takes more skill and more education, but too many Americans aren’t ready. This problem awaits us after the “fiscal cliff.’”




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A Hollow Powerhouse




There is a continual complaint that US manufacturing has been “hollowed out.” Where manufacturing jobs once were tickets to the middle-class lifestyle, there are now fewer and fewer such jobs available. Indeed, the next chart shows that manufacturing jobs are down almost 40% from the peak in 1978 and back to roughly where they were during World War II.
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Yet the number of manufacturing employees doesn’t tell the whole story. The US is still the number one manufacturing country in the world. We are an export powerhouse. Indeed, the growth of exports in the last 20 years has been nothing short of phenomenal.




Exports have doubled and then doubled again. Total manufacturing in the US has almost come back to where it was prior to the Great Recession. Productivity in the last 20 years is up over 50%. We are producing as much as or more than we did in the past but with far fewer people. Taken alone, US manufacturing would be the ninth largest economy in the world. See the next three charts:





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The chart below shows the average growth in productivity over various periods during the last 65 years. Note that after the postwar boom productivity growth fell and then began to increase again, up until the Great Recession. Greenspan was right to call it the Productivity Miracle.






We’ve Seen This (Manufacturing) Movie Before




At the dawn of the 19th century, farmworkers were somewhere between 75% and 80% of the entire labor force. That number was still over 50% in 1860. It was not just the Industrial Revolution that increased the number of manufacturing workers in the US, it was an agricultural productivity revolution that allowed more food to be produced by fewer people. Even so, productivity growth was not all that exceptional in the first 60 years of the 19th century.




But that was then and this is now. Today the percentage of the labor force employed in agriculture is less than 2%. Agricultural productivity is up some 16 times since 1880, but we barely have more than two million people working on the farm, about the number working in agriculture in 1820. Take a look at the charts below:
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This latter chart is from this link.




The Industrial Revolution and the shift to a manufacturing economy was clearly disruptive to employment. Yet who would advocate going back even 40 years to when the farm labor force was three times the relative size it is today? Especially if you had to be the farm labor? Been there, done that. Not interested in hoeing spuds.





A Manufacturing Renaissance





Just as agricultural output per worker has increased dramatically over time, I think that in the next 40 to 50 years we will see massive gains in manufacturing output without an accompanying large increase in manufacturing jobs. Companies are beginning to bring manufacturing back to the US because automation, robotics, and other new technology make it cheaper to manufacture products locally than to use inexpensive labor in other countries. I am told that Foxconn (in China) is beginning to use robotic manufacturing lines. When Foxconn is turning to robots rather than cheap labor, you know there is a revolution in the offing.




Yet even the manufacturing jobs that are left will not demand a “college degree.” They will require serious skills and technical know-how, but that is different from the typical college degree. That is not to say college education will not be useful, but it is increasingly going to have to be an education that has a focus and goal of a marketable skill.




What is going to be needed is the creation of brand-new industries, as well as the unleashing of the entrepreneurial skills of the younger generation. Small business is the engine of growth for jobs.




It seems that all politicians can do is talk about the need to create jobs, yet the reality is that government doesn’t create jobs. It can create the conditions in which jobs are created, but it is up to the individual businessman (or, increasingly, businesswoman) to make a decision to hire additional workers.




My friend Bill Dunkelberg is the chief economist for the National Federation of Independent Businesses. He’s been doing regular surveys since at least 1974. His latest monthly survey shows that businesses are not terribly optimistic in terms of their plans to increase employment, which should be no surprise. The number one problem? Uncertainty.





Let’s hope that our political leaders can give us a little more certainty and that it will not be the certainty of a recession. David Krone (Senate Majority Leader Reid’s chief of staff) felt, in our interview for the Summit tomorrow, that it was only 50-50 that a deal would be done to avert the fiscal cliff. He was rather adamant that they would rather go over the cliff than kick the can down the road on the deficit. Not that it couldn’t be fixed later – but I suggest you listen to at least that part of the interview we’ll post tomorrow.



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I should note that both congressional chiefs of staff acknowledged they have been working for weeks prior to the election to come up with solutions to the cliff. These are the guys (along with their counterparts) responsible for much of the detail that will come out of the negotiations. They don’t get interviewed often, and that is a shame. It makes you feel better about the country to know there are people who care enough about our future to work with each other responsibly, even if they don’t agree on the path we must take.




Have a great week. I will do my own part for the employment numbers this week and make a job offer to a new potential associate.




Your trying hard to imagine the future analyst,



John Mauldin

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Copyright 2012 John Mauldin. All Rights Reserved.



Israel is all but alone in the Middle East

Ian Bremmer

November 20, 2012



 
 

On Monday, Turkish Prime Minister Recep Tayyip Erdogan denounced Israel as a “terrorist state”. Whether you find yourself nodding or shaking your head in response, take a moment to consider those words.
 
 
 
 
This judgment did not come from predictable quarters: from Syria’s soldiers, Iran’s mullahs, or even Saudi royals. Turkey is a moderate Muslim democracy, a member of Nato, one that has traditionally protected constructive relations with Israel. And Mr Erdogan did not simply denounce a particular Israeli action, as he did in 2010 following an Israeli raid on a Turkish aid ship bound for Gaza.
He labeled Israel itself as a source of terrorism.




What’s truly new about Israelis and Palestinians exchanging fire? It isn’t Israeli politics. Early elections are on the way, and there are few signs that Prime Minister Benjamin Netanyahu faces a serious leadership challenge. Nor is it the increasing number and accuracy of rockets fired by Hamas and its Al-Qassam brigades.
 
 
 
 
It is the surrounding landscape that has changed. The immediate neighbors are the first worry.




Egypt’s embattled civilian leaders have little incentive to give Israel any breathing room. The same can be said for Jordan, and Israel has very few friends on any side of Syria’s grinding civil war. In fact, governments in the Middle East, even those that are relatively stable, must worry about public opinion as never before. And outside the US, it’s getting hard to find a country in which public opinion remains on Israel’s side.




That’s why it is especially worrying that Israel is behaving as if none of this matters. For the near term, perhaps it doesn’t.




Though Hamas has managed to stockpile a substantial number of increasingly sophisticated weapons, Israel plainly has the means to restore order-with brute force where necessary-and its “Iron Domeanti-missile system will hold. Hamas will fight on knowing that its forces are overmatched.




But on the international stage, this conflict and the response it has provoked from moderate governments like Turkey’s are game-changers. There are no longer persuadable partners in the region.




Washington will defend its old friend. President Obama has made crystal clear that Israel’s operations in Gaza have his full support. Hillary Clinton, the US secretary of state, is expected to travel to the region today. Yet, the US is not the power looking to become more active in the Middle East in years to come. That country is China, a still-emerging power that has no cultural and ideological ties with Israel to protect as it looks to ensure the steady long-term flow of crude oil.
 
 
 
 
For all these reasons, it has never been more important for Israel’s long-term security for Israelis leaders to build and protect a workable peace with Palestinians. Sadly, after years of diplomatic inaction and now another surge of deadly violence, that peace looks more remote than ever.





The writer is the president of Eurasia Group, a political risk consultancy, and author of ‘Every Nation for Itself: Winners and Losers in a G-Zero World’

miércoles, noviembre 21, 2012

FROM GAZA TO WHERE ? / PROJECT SYNDICATE

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From Gaza to Where?


Gareth Evans

20 November 2012
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CANBERRAThe wisest words on the Second Gaza War may have come from an Israeli living in a kibbutz near the Gaza border. “If you want to defend me. Don’t send the Israel Defense Forces for us in order to ‘win,’” Michal Vasser wrote in Haaretz on November 15. “Start thinking about the long term and not just about the next election. Try to negotiate until white smoke comes up through the chimney. Hold out a hand to Palestinian President Mahmoud Abbas. Stop with the ‘pinpoint assassinations’ and look into the civilians’ eyes on the other side as well.”
 
 
 
 

Israel is, of course, entitled to defend itself from rocket attacks. But the lesson of the last two decades is that attacks stop, and intifadas do not start, when there is a prospect of peace – and that, when there is no such prospect, Palestinian militancy is uncontainable.
 
 
 


The chances of a comprehensive and sustainable two-state settlement now being negotiated with Mahmoud Abbas’s West Bank-based Palestinian Authority (PA) – and of its acceptance, albeit grudgingly, by Gaza’s Hamas after a popular vote – may be slim and receding. But the only alternative is an endlessly recurring cycle of deadly violence between Israelis and Palestinians.

 
 
 
 
 
The immediate priority is to calm and stabilize the situation in Gaza. But if there are not to be more and even worse eruptions, Israeli policymakers need to ask themselves some fundamental questions. So, too, must their rusted-on supporters in the United States and countries like mine.
 
 
 
 


How is peace fostered if the elimination or dramatic diminution of Hamas’s capability leaves Gaza in the hands of even more militant groups, and gives Islamists throughout the region another recruitment tool?
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How is Israel’s national security served when, by its action in Gaza and inaction with Abbas, it jeopardizes its longstanding and hard-won peace treaties with Egypt and Jordan (both now looking very fragile indeed in the aftermath of the Arab Spring)?
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How can Israel’s preferred Palestinian leaders, Abbas and PA Prime Minister Salam Fayyad, be left with any credible capacity to negotiate if talks cannot begin until, as Israel insists, they retreat on their minimum condition of a settlement freeze in the Occupied Territories?

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For all that Israel downplays its significance, the Arab Peace Initiative of 2002 still offers a critically important deal: full normalization of relations by the entire Arab world in exchange for a comprehensive peace settlement. How long can this Arab League position be sustained with peace talks going nowhere?
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Another big question for Israel is whether it can accept the consequences if a two-state solution disappears completely from the agenda. Israel, as founding father David Ben-Gurion warned, can be a Jewish state, it can be a democratic state, and it can be a state occupying the whole of historical Israel; but it cannot be all three.
 
 
 


According to the CIA World Factbook, Jews currently outnumber non-Jews, by 6.4 million to 5.6 million, in the total area of historical Palestine. But, with a much lower birthrate and declining immigration, it is only a matter of time before Jews are in a minority.
 
 
 
 


With Gaza still smoldering, yet another burning question is waiting in the wings. What are Israel and its supporters supposed to gain by bitterly resisting the United Nations General Assembly resolution recognizing Palestine as a non-memberobserver state” (with a status like the Vatican), which now seems bound to be introduced, and passed by a huge international majority, on or around November 29?

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The text of the draft resolution now in circulation contains no offensive language. It makes clear both that full UN membership remains to be determined and that final-status issues like borders, refugees, Jerusalem, and security all remain to be negotiated. True, passage of this resolution might give Palestine some standing that it now lacks to seek prosecutions in the International Criminal Court for alleged violations of international law. But the ICC is not a kangaroo court, and allegations without substance can be expected to be treated accordingly.

 
 
 
 
 
Palestinian statehood has always been an indispensable requirement of Israel’s own long-term peace and security, and it is overwhelmingly in Israel’s interest to defuse rather than further inflame the issue. This need has become more urgent than ever in view of the new realities of power in the region.
 
 
 
 
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In short, Israel should treat the UN vote not as an excuse for renewed confrontation, but as an opportunity for a fresh start to serious negotiations. The US reaction is key: Rather than punishing the PA, and maybe the UN as well, it should use the resolution to propose the kind of diplomatic circuit-breaker for which the world has long been hoping.
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Of course, to put on the table a comprehensive settlement plan that addresses all of the final-status issues, with compromises that all sides could be persuaded and pressured to accept, would require statesmanship. Unhappily, that quality has been agonizingly absent from Middle East diplomacy for almost as long as anyone can remember.

 
 
 
 
 
Gareth Evans, Australia’s foreign minister for eight years and President Emeritus of the International Crisis Group, is currently Chancellor of the Australian National University and co-chair of the Global Center for the Responsibility to Protect. As Foreign Minister, he was at the forefront of recasting Australia’s relationship with China, India, and Indonesia, while deepening its alliance with the US, and helped found the APEC and ASEAN security forums. He also played a leading role in bringing peace to Cambodia and negotiating the International Convention on Chemical Weapons, and is the principal framer of the United Nations’ “responsibility to protect” doctrine.